Oil prices stable as market tracks Libya, US

24th August 2011, Comments 0 comments

World oil prices were steady on Wednesday as traders monitored the latest unrest in Libya and awaited fresh energy data and economy developments in the United States.

Brent North Sea crude for October delivery fell nine cents to $109.22 a barrel in early afternoon London deals.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for October, gained just one cent to $85.45.

Prices had risen on Tuesday, lifted by gains across financial markets on hopes of new US economic stimulus and as traders tracked the Libyan crisis.

Later Wednesday, the US government's Department of Energy will publish its report on American oil inventories for the week ending August 19.

Ahead of the data, traders remained focused on Libya and on whether Federal Reserve chief Ben Bernanke would announce new stimulus measures to boost the struggling US economy at a meeting of central bankers later this week.

Libyan rebels hunted for Moamer Kadhafi and battled remnants of his forces Wednesday, as the defiant strongman boasted he had walked around Tripoli and urged residents to cleanse the capital of "rats."

Bernanke meanwhile gives a crucial speech on Friday, with markets suggesting he could unveil a third round of Quantitative Easing (QE3), essentially a fresh move by the US central bank to pump up the slowing economy with newly-created money.

"A possible QE3 and the developments in Libya will be the main determents of oil prices in the coming weeks. However, if the weekly US oil stats return to weak demand numbers it could get some attention," said DnB NOR Markets analyst Torbjorn Kjus.

SEB Commodity Research analyst Filip Petersson said oil prices could drop temporarily should the Libya crisis ease -- and if strongman Moamer Kadhafi was caught by rebel forces in the oil-producing African nation.

"Bearish influences could come from Libya -- e.g. if Kadhafi is caught -- but these are likely to be short lived as the market is starting to realize that Libya is highly unlikely to be back at pre-war capacity anytime soon."

On Monday, as news broke that Kadhafi's rule could soon end, Brent oil prices fell to below $106.

But the contract rebounded after initial euphoria that Libyan oil production would return to pre-revolt levels evaporated as it was evident the country's facilities would take some time to get back online.

Brent is more affected than WTI by the situation in Libya as it competes directly with Libyan crude in the European markets.

Around 85 percent of Libyan oil output was exported to Europe until the revolt slashed the country's production six months ago.

Europe's refiners have struggled to replace Libya's highly valued light crude, sending prices soaring in the first six months of the year.

© 2011 AFP

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