Brent Crude Nears $110 on Libya Crisis

Brent crude rose to nearly $110 a barrel in Asian trade Wednesday, underpinned by the crisis in oil-rich Libya after rebels overran the compound of Moamer Kadhafi, analysts said.

The contract has steadily risen in the past two days after initial euphoria that Libyan oil production would return to pre-revolt levels evaporated as it was evident the country's facilities will take some time to get back online.

Brent North Sea crude for October delivery turned lower in afternoon trade, dipping nine cents to $109.22, but analysts said the general trajectory is for prices to trend higher.

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

New York's main contract, West Texas Intermediate (WTI) light sweet crude for October settlement, eased 26 cents to $85.18 a barrel.

Brent is more affected than WTI by the situation in Libya as oil from the North Sea as well as from Libya serve the European markets.

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

"The fact that not only is the fighting not over but the realisation that it will take at least a year to get production back to 1.6 million barrels a day, that is having an impact on Brent," said Jim Nicholson, regional vice president with Argus Media energy market news publisher.

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

"The reincorporation of Libya into the oil market is unlikely to be a smooth transition," Barclays Capital analysts wrote in a report.

"Over the coming days, as headlines from Libya continue to flow, the market could easily be meshed in a bearish sentiment, only to later realise the reality that supplies are unlikely to flow into the market as swiftly as initially expected."

Celebratory gunfire was heard Wednesday in Tripoli after rebels overran Kadhafi's compound, despite finding no sign of the dictator or his sons.

It came after three days of fighting in the capital which left more than 400 people dead and 2,000 wounded.

But Kadhafi loyalists still held out in parts of the city and were in control of the Rixos Hotel, headquarters of foreign journalists accredited to the regime, preventing any of them from leaving.

Several hours later pro-Kadhafi media quoted him as saying he had abandoned the compound in a "tactical withdrawal" after it was wrecked by NATO bombing attacks.

The speech gave no indication of where he had gone.

Source : AFP

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