LIBYA SITUATION CONTINUES TO IMPACT OIL MARKETS - World markets saw the price of oil fall yesterday as traders factored in the prospect of a resumption of exports from Libya. Overnight the price of Brent North Sea crude fell to as low as $105.15 a barrel. Before the uprisings Libya produced around 1.6 million barrels of oil a day - 1.3 million for export - but conflict and sanctions led to sharp reductions in output, which is thought to have fallen to as little as 100,000 barrels a day. Even though it represents only 2% of world output Libya has Africa's biggest oil reserves, its oil is easily refined, and its location also makes it desirable for Europe.
Caroline Bain, the Economist Intelligence Unit's senior commodities editor, says the price of oil is set for further drops, not just because of the current turmoil in Libya but because of lower economic projections for the US and the euro zone. She says the new oil fields in Libya - which could supply up to one million barrels of oil a day - could be up and running in a year, but the older fields could take two to three years to reach full production again.
David Horgan, the chief executive of Petrel Resources, says that when the conflict erupted in Libya, 2% of the world's oil supply was lost overnight. While the country has a well developed oil industry, it was very dependent on the likes of Italy's ENI and other global companies. These companies immediately withdrew from the country and the entire oil industry there practically shut down.
Mr Horgan says Petrel Resources did not work in the country due to a number of reasons including the fact that the Libyan government had required money up front from oil companies and its harsh fiscal terms. He says, however, that the country may present an opportunity for companies like his because if there is too much uncertainty there the majors may stay away until stability is returned. He says that chaos was caused in the Iraq oil industry when the new government decided to change the laws for its oil industry. Something similar may happen in Libya - again presenting the minor oil companies with new opportunities.
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MORNING BRIEFS - Uncertainty about the world economy and a weak dollar saw the price of gold crossing the $1,900 per ounce mark for the first time. In early Asian trade today it hit 1,911.46 an ounce. Fears of a slowdown in the US and the debt crisis in Europe have spurred demand for gold. There is talk it could rise even further as analysts say demand is also being driven by speculation that the US Federal Reserve may announce new stimulus measures, like printing more dollars, in a bid to boost the economy.
*** The Irish Times reports that Richard Branson's Virgin Money has expressed an interest in MBNA's business in Carrick-on-Shannon, but has not yet held detailed talks with MBNA's owners Bank of America. Virgin Money already has credit card operations in England, Scotland and Wales. It has an existing loan book of €4 billion. IDA Ireland has been identifying potential bidders, but it is waiting for a decision from Bank of America on how it wants to get out of the business.
*** On the currency markets this morning the euro is trading at $1.4379 cents and 87.26 pence sterling.
