MILAN — Brent crude prices fell to near $107 a barrel on Monday after Libyan rebels captured most of the country’s capital, boosting hopes the OPEC nation’s oil exports could resume soon.
Rebels overran a large part of Tripoli after a quick advance as defense of Moammar Gadhafi’s regime collapsed. Gadhafi’s whereabouts were unknown while two of his sons were captured by rebels.
Prospects of an end to the Libyan civil war lifted hopes that the country would be able to gradually bring daily output back to pre-crisis levels of 1.6 million barrels of oil. However, estimates on how long that will take varied from several weeks to a full year.
Italian Foreign Minister Franco Frattini said Monday that Eni technicians were already working to restart oil and natural gas production from the country. Eni is the largest foreign producer in Libya, and most of the plants were built by its subsidiary Saipem.
Frattini told RAI state television that Eni workers have been called to Bengazi to reactivate plants and that there were technical consultations already last week.
Eni declined to elaborate on the comments, but noted that restarting production could take some time — a couple months for natural gas and even a year for oil.
By contrast, Carsten Fritsch, an analyst with Commerzbank, noted that rebels expect output to resume within three weeks of Gadhafi being toppled.
The speed with which production can be restarted depends on the state of infrastructure and how quickly oil companies move workers back to Libya. Pressure also needs to be built up in the fields and pipelines, meaning output would resume incrementally.
News of the rebels’ capture of Tripoli weighed on Brent crude prices, with the benchmark contract down $1.37 per barrel to $107.25 on the ICE Futures exchange in London by afternoon European time.
The benchmark U.S. oil contract on the New York Mercantile Exchange, however, was up slightly — 50 cents to $82.76 a barrel. Brent has been at unusual premium to the U.S. crude futures contract for months, in large part due to the fact that Europe relies more than the U.S. on oil from Africa, including Libyan imports.
“If the Gadhafi regime falls, Libyan oil production should gradually resume and European markets would directly benefit from that,” said Victor Shum, an analyst with energy consultant Purvin&Gertz in Singapore. “Having more supply while the global economy is under threat should put downward pressure on oil prices.”
Gas and oil production has been mostly halted in Libya since February. Although Libyan oil amounted to less than 2 percent of world demand, its loss affected prices because of its high quality and suitability for European refineries.
Eni evacuated all of its personnel in Libya in March, but has said no damage has been reported to the plants and pipelines and that it would be technically able to resume output close to pre-crisis levels once the situation had returned to normal.
Eni produced 273,000 barrels of oil and natural gas in 2010 in Libya, about 15 percent of the company’s worldwide production. Shares in the company were up 5 percent to €13.10.
Repsol, another big producer in Libya, was not reachable for comment.
Fears of an economic slowdown in the U.S. and Europe have weighed heavily on energy prices in recent weeks and are expected to remain key to market sentiment in the longer term, although the Libyan developments dominated trading on Monday.
“In the coming days, the price could drop further towards $100 a barrel,” said Fritsch, referring to Brent crude.
In other Nymex trading for October contracts, heating oil fell 1 cent to $2.89 per gallon and gasoline futures dropped 4 cents to $2.81 per gallon. Natural gas for September delivery sank 4 cents to $3.90 per 1,000 cubic feet.