World markets bounce as investors eye Libyan oil

 

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The Independent Online

The world's markets bounced back yesterday, with oil prices falling as traders factored in the prospect of a resumption of exports from Libya.

Tripoli produced about 1.6 million barrels of oil per day before uprisings broke out across the Middle East and North Africa in the spring.

Exports stood at 1.3 million barrels a day until the conflict began and sanctions against Muammar Gaddafi's regime led to sharp reductions in output, which is estimated to have fallen to as little as 100,000 barrels per day.

Europe was the main buyer, consuming about 85 per cent of the country's exports before the conflict. But signs that Colonel Gaddafi's four-decade reign of repression and terror was finally nearing an end sparked hopes of renewed activity at dormant oilfields. Although it is likely to be months before exports recover to levels seen before the conflict, the prospect was enough to send Brent crude down by as much as $3.46 or more than 3 per cent to $105.15 per barrel in early trade. Prices recovered to about $107, a fall of about 1.4 per cent, in late afternoon trading.

As oil prices fell, stock markets bounced back from the lows struck during last week's turmoil. The falls were triggered by fears about global growth and, while concerns remain, lower oil prices would offer relief to economies struggling with inflation.

In London, the FTSE 100 climbed by 1.1 per cent to end the day at 5,095.3 as oil stocks, including BP and Shell, rose. Across the Channel, European markets were also strong, with the main Italian exchange, where a number of companies are exposed to Libya, closing 1.8 per cent higher.

In the US, the Dow Jones index was up 1.8 per cent in early trading. But concerns about global growth continued to linger in the backdrop.

In Libya, a key factor in the recovery of oil exports will be the damage done to the oil industry's infrastructure and equipment.

Carsten Fritsch, an analyst at Commerzbank, said it might take about six months for output to rise back to one million barrels per day.

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