Brent crude futures rallied above $110 a barrel on Wednesday, posting the biggest three-day percentage gain in a year, as the escalating violence in Libya could further reduce its production. Between 300,000 and 400,000 barrels per day of Libyan output—up to 25%—has been shut down, according to Reuters calculations, marking the first cut in oil supplies related to the recent wave of anti-government unrest in North Africa and the Middle East. After Libyan leader Muammar Gaddafi vowed in a defiant speech on Tuesday that he would not step down, promising severe punishment to his detractors, analysts fear that long-lasting supply disruptions or even permanent damage lies ahead for the Opec member’s oil industry. Traders were intently watching what top OPEC exporter Saudi Arabia will do, even as its oil minister has reiterated assurances the kingdom and other OPEC members would be ready to act should there be a supply shortfall.
1 comment:
With the oil sector accounting for 80% of the economy in a nation like Libya, one also needs to consider the potential effects of short-run and long-run price elasticity on the price of oil.
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