Crude Oil easing off highs after Libya peace talks : Crude Futures fell below USD112 a barrel on the expectations that a peace accord will be reached to end the Libyan conflict. The African Union said Muammar Gaddafi accepted a plan to end the civil unrest in the oil producing nation.
However, some believe that the peace plan would only work if Gaddafi completely left power. Meanwhile, some analysts are doubtful that any deal will be reached. Commerzbank’s Carsten Fritsch commented: “We have seen such peace plans before…Unless Gaddafi steps down I think there is little room for discussion from the rebel side.”
In fact, on Monday morning NATO reported that Libyan government forces had bombed the Libyan city of Mistrata, indicating that a peace deal is far from close at this point. NATO plans to continue targeting Gaddafi’s forces as long as civilians are still being threatened.
Even if the conflict ends soon, some analysts said so much damage has been done to many oil installations that it would take time for oil exports to resume previous levels. Since the conflict had begun, the nation’s oil output had fallen by as much as 80% from its regular output of 1.6 million barrels a day. This had pushed oil prices to surge to all time highs.
However, Commerzbank analyst Carsten Fritsch said “Oil prices have now reached levels that are no longer justified. “ He added, “It is largely being driven by fear at present and not by actual supply bottlenecks.” He believes that spare capacities will only reach critical levels if another large oil supplier drops out of the market. Saudi Arabia mentioned on the weekend that they are ready to produce 12.5 million barrels a day if necessary. So this should calm market fears.
On Friday, Brent Crude prices rose over USD4 to surge above USD126 a barrel, the highest in 32 months. Meanwhile Crude Oil hit a new high since July 2008 to peak at USD113.44 during Monday’s Asian session. Since then it dropped almost 20 pips to reach a low of 111.52 during the European session.
However, some believe that the peace plan would only work if Gaddafi completely left power. Meanwhile, some analysts are doubtful that any deal will be reached. Commerzbank’s Carsten Fritsch commented: “We have seen such peace plans before…Unless Gaddafi steps down I think there is little room for discussion from the rebel side.”
In fact, on Monday morning NATO reported that Libyan government forces had bombed the Libyan city of Mistrata, indicating that a peace deal is far from close at this point. NATO plans to continue targeting Gaddafi’s forces as long as civilians are still being threatened.
Even if the conflict ends soon, some analysts said so much damage has been done to many oil installations that it would take time for oil exports to resume previous levels. Since the conflict had begun, the nation’s oil output had fallen by as much as 80% from its regular output of 1.6 million barrels a day. This had pushed oil prices to surge to all time highs.
However, Commerzbank analyst Carsten Fritsch said “Oil prices have now reached levels that are no longer justified. “ He added, “It is largely being driven by fear at present and not by actual supply bottlenecks.” He believes that spare capacities will only reach critical levels if another large oil supplier drops out of the market. Saudi Arabia mentioned on the weekend that they are ready to produce 12.5 million barrels a day if necessary. So this should calm market fears.
On Friday, Brent Crude prices rose over USD4 to surge above USD126 a barrel, the highest in 32 months. Meanwhile Crude Oil hit a new high since July 2008 to peak at USD113.44 during Monday’s Asian session. Since then it dropped almost 20 pips to reach a low of 111.52 during the European session.
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