Brent crude rose to nearly $110 a barrel in Asian trade Wednesday, underpinned by the crisis in oil-rich Libya as rebels overrun the compound of strongman Moamer Kadhafi, analysts said.
The contract has steadily risen in the past two days after initial euphoria that Libyan oil production will 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 was three cents higher at $109.34 dollars a barrel in the afternoon from Friday’s close of $109.31.
On Monday, as news broke that Kadhafi’s rule could soon be ended, the contract fell to below $106.
New York’s main contract, West Texas Intermediate (WTI) light sweet crude for October delivery added 28 cents to $85.72 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.