Oil prices jump after West launches Libyan air strikes

21st March 2011, Comments 0 comments

World oil prices rallied Monday in the aftermath of Western air strikes on key crude exporter Libya.

Brent North Sea crude for delivery in May was up $1.23 to $115.16 a barrel in late London trade.

New York's main contract, light sweet crude for May, added $1.17 to $102.24 a barrel.

French, American and British forces have launched the biggest intervention in the Arab world since the 2003 US-led invasion of Iraq, firing more than 120 Tomahawk Cruise missiles and conducting bombing raids into Libya on Saturday.

The action by the US, Britain and France came after the UN Security Council authorised the use of "all necessary means" to protect civilians and enforce a ceasefire and no-fly zone against Libyan leader Moamer Kadhafi's forces.

"Oil prices have gone up due to military attacks in Libya from UN forces," said Victor Shum, an analyst at energy consultants Purvin and Gertz.

"More oil installations could be damaged due to collateral damage and internal sabotage," Shum told AFP.

He added: "The unrest in the Middle East and North African region may spread to other (parts of the) region, and hence the contagion effect on oil prices remain. Oil supply disruption is going to support prices in its triple digits."

Kadhafi has continued attacking rebels after an uprising against his four-decade-old regime, following similar movements in Egypt and Tunisia that rocked the region and sent oil prices soaring in recent weeks.

International sanctions and unrest have meanwhile virtually halted all of Libya's oil exports.

Libya was producing 1.69 million barrels a day before its violence erupted, according to the International Energy Agency. Of this 1.2 million barrels were exported, mostly to Europe.

"In the short term, the attacks of the coalition do not change much as exports were already down to almost zero," noted PetroMatrix analyst Olivier Jakob in Zurich.

"Having a view on how long it will take before oil can flow again is too difficult at this stage as the map is changing from hour to hour.

"A stalemate at current positions leaves most of the oil export ports in the hands of the Kadhafi regime," he added.

In London, the Centre for Global Energy Studies said the oil market needed "a clear unambiguous signal" from the OPEC cartel that the lost Libyan production would be replaced, or risk a repeat of the 2008 price surge when crude futures struck record highs above $147 a barrel.

In its monthly report published Monday, CGES wrote: "The oil market has been tightening since the middle of 2010, but OPEC has done little to try to prevent a repeat of the damaging surge in oil prices that we saw in 2008, which was followed by an abrupt collapse in global oil demand and, with it, OPEC oil production and revenues."

The Organization of Petroleum Exporting Countries (OPEC), of which Libya is a member, produces about 40 percent of the world's oil.


© 2011 AFP

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