Rebel advances in Libya unlikely to push oil prices down - analyst

28 March 2011 16:21  [Source: ICIS news]

LONDON (ICIS)--Crude oil prices are unlikely to decline significantly despite rebels in Libya over the weekend taking control of the major oil ports of Brega and Ras Lanuf, an analyst with Commerzbank said on Monday.

In a research note, Commerzbank estimates that oil production in Libya's eastern regions that are under rebel control to be 100,000–130,000 bbl/day.

Carsten Fritsch, an analyst with the bank, said: “It is very doubtful that this level of production will have an impact on oil prices, when, prior to the outbreak of the unrest, 1m barrels of crude oil were being produced from eastern Libya.”

With reports of rebel forces now advancing to towns in western Libya controlled by Muammar Gaddafi, Fritsch said he is uncertain about normality being restored in the country.

“Stronger support for the Libyan leader is present in these strongholds. It is therefore unlikely the rebels will have as much success in overthrowing Gaddafi’s forces there,” he said.  

With no end in sight to the military action in Libya and unrest continuing in other oil-producing countries in North Africa and the Middle East, Fritsch said he is doubtful whether oil prices will mark an immediate decline.

He said prices in the immediate future will most likely hover around levels seen in the past couple of weeks.

At 15:11 GMT on Monday, May Brent was trading at $115.86 and WTI was at $104.75.

John Drake, a senior risk consultant with advisory firm AKE, said it will be difficult for rebels to find the foreign expertise needed to regain higher levels of crude oil production.

“Many overseas workers will be unwilling to work in Libya, with insurance currently too expensive and difficult to obtain,” he said.

“It will be a complicated process for foreign oil companies, and they may find it hard to arrange the appropriate contracts with opposition partners,” Drake added.

Read Paul Hodges’ Chemicals and the Economy blog

By: Neha Popat
+44 208 652 3214

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