Oil prices dip amid Libya air strikes

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World oil prices dipped Tuesday on profit-taking, one day after spiking on Western military action in Libya, a significant exporter of crude before the current crisis.

New York's main contract, light sweet crude for delivery in April fell 16 cents to $102.17 a barrel, while Brent North Sea crude for May shed 20 cents to $114.76 in midday London trade.

Despite edging down, oil prices continued to win support from "tensions in the Middle East," said Ong Yi Ling, an investment analyst for Phillip Futures in Singapore.

Oil-rich Libya was producing 1.69 million barrels a day before the unrest, according to the International Energy Agency. It is now producing only 400,000 barrels a day.

"Investors are expecting that Libyan oil is not returning to the markets any time soon," said Ling.

Libyan leader Moamer Kadhafi's Tripoli compound was rocked by fresh blasts late Monday, his southern strongholds targeted and a navy base bombed as the US-European coalition sought to pin down his military.

The intervention by French, American and British forces in Libya has hobbled loyalist forces but offers little hint of how the situation will be resolved.

World oil prices had closed up more than a dollar on Monday in the aftermath of initial air strikes on Libya by Western jets at the weekend. They were also boosted by heightened turmoil in Yemen, another oil exporter.

And Japan inability to gain full control of the Fukushima nuclear plant amid meltdown fears also contributed to continued high volatility in the market, analysts said.

Analysts at JPMorgan said they expected more volatility in a multiple-crisis environment.

"Oil prices continue to see-saw with developments in the Middle East and Japan. Potential for short-term disruptions as well as low-probability but high-impact events is driving the market," they said.

Meanwhile the recent spike in oil prices could shave half a percentage point off growth of the world's advanced economies by 2012, according to a study by the Organisation for Economic Cooperation and Development published Tuesday.

"The recent oil price hikes may have a modest impact on activity in the near term," said the study entitled The Effects of Oil Price Hikes on Economic Activity and Inflation.

"...if the $25 increase in the price of oil that has taken place since the Tunisian uprising (earlier this year) were to be sustained, activity could be reduced by about 0.5 percentage points in the OECD area by 2012 and inflation cold rise by 0.75 percentage points," it added.

© 2011 AFP

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