December 6, 2023

Oil Prices Ease as Libyan Rebels Plan to Resume Production

Over the last two days, the rebels have seized several towns with important oil installations that they said would enable them to produce and export crude. The rebels said they would able to produce up to 130,000 barrels of crude a day, still less than a tenth of what Libya exported before turmoil erupted last month.

While the amount of oil the rebels said they could export was small, Libyan oil is particularly valued on world markets because it is high quality, needs little refining and is particularly well suited for European diesel markets. Although there is concern that the rebel advance may prove to be fleeting, oil traders responded to their victories by pushing down the price of most world oil benchmarks, albeit modestly.

In early trading in New York, the price of light sweet crude was down $1.64 a barrel to $103.76. As the morning progressed, prices began to drift higher, and by afternoon had reached $104.61, still a decline of 79 cents. The price is 8 percent higher than it was a month ago, and 30 percent higher than a year ago, threatening the global economic recovery.

President Obama planned to address the nation Monday night regarding the United States involvement in Libya. The administration has been accused of failing to make its goals clear with regard to the action in Libya.

Some oil analysts expressed doubts the Libyan advance would make a lasting impact. Tanker companies will need to find ways to obtain insurance before they will venture into Libyan ports, analysts noted, and the rebels’ ability to retain control over oil terminals may be tested.

“With military action continuing and sanctions very much in place, it will be hard to move oil out of the country,” Barclays Capital reported in a research note. “There isn’t much clarity as to how many of the actual oil fields are under the control of the rebels.”

Nevertheless, it was the third day in a row that oil prices fell as the rebels’ fortunes improved. Another cause for the drop in oil prices is the strengthening of the dollar, which normally makes the commodity more expensive to buy in other currencies.

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