Oil has retreated with Brent slipping below $115 after Libyan rebels regained control of key oil towns, and unrest over the weekend was limited to minor crude exporters Syria and Yemen.
Western-led military intervention in Libya prompted speculators to raise their bets on higher prices by 6 percent in mid-March, before rebels took back a series of towns including oil terminals over the weekend.
A Libyan rebel official said Gulf oil producer Qatar had agreed to market crude oil produced from east Libyan fields no longer in Muammar Gaddafi’s control.
“These are positive developments which are negative for oil prices potentially as they have taken back some of the main oil export towns,” said Olivier Jakob, oil analyst at Petromatrix.
Rebels have regained control of all the main oil terminals in the eastern half of Libya, namely Es Sider, Ras Lanuf, Brega, Zueitina and Tobruk. On Monday, they also claimed to have taken control of Sirte, Gaddafi’s hometown.
A Reuters reporter in Sirte said there was no indication the city was under rebel control.
Jakob also pointed to the fact that the dollar was slightly stronger this morning. A stronger dollar means that commodities priced in dollars are more expensive for those using other currencies.
Output from Libyan oilfields controlled by rebels was running at about 100,000 to 130,000 bpd, which could be increased to 300,000, Ali Tarhouni, a rebel official in charge of economic, financial and oil matters, said. Libya was pumping about 1.6 million bpd before the rebellion.
But some analysts are sceptical about how quickly things will return to normal.
“Maybe there’s some hope that with rebels regaining control of most of the Eastern part of Libya and the lion’s share of Libyan production, normality may resume soon but I think it is still too early,” said Carsten Fritsch, an analyst at Commerzbank. “Damage to oil facilities will prevent a sudden return to normal production levels.”
Eurozone debt
European leaders agreed a new package of anti-crisis measures at a two-day summit, but were forced to delay increasing their rescue fund and acknowledged they faced new threats from a government collapse in Portugal.
“The unrest in the Middle East is providing support, but the Portugal crisis is capping gains,” said Natalie Robertson, a commodities analyst at ANZ.
“Investors will hold onto their long position until something of significance occurs in the market. If they have fully priced in the unrest, the market is susceptible to drops due to profit taking.”
Syria deployed the army to the country’s main port in an attempt to rein in spreading protests across the country, while in Yemen talks stalled between the government and opposition.
Bahrain’s foreign minister said it was “completely untrue” that Kuwait would mediate to resolve Bahrain’s political crisis. The Gulf Cooperation Council – a regional political and economic bloc made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – had welcomed the mediation move.
Saudi Arabian King Abdullah earlier in March announced $93bn in social handouts, the second benefits package to be unveiled within a month as the kingdom attempts to contain discontent, especially from Shi’ites in the east of the country, where the world’s biggest oil reserves are located.
“That’s a reason oil is trending higher – simply OPEC is demanding a higher price for its oil, and the developments in the Middle East are exacerbating that trend by pushing some producers like Saudi Arabia to expand their expenditures at rapid rates,” Francisco Blanch, Bank of America Merrill Lynch’s global head of commodity research, told reporters in Calgary.
“The economy is squarely reliant on oil and becoming a lot more reliant because the unrest is forcing politicians in Saudi to start throwing money at the problem.”
