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Libya end-game pulls down oil prices

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Libya end-game pulls down oil prices
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Anticipating the resumption of oil exports from Libya with the end of the civil war there the price of Brent crude in London has fallen.

In the US the price rose on expectations of further government stimulus measures there which could increase demand.

Italian oil company Eni – the top producer in pre-war Libya – saw its shares surge. Staff from Eni are already at oil facilities in the country’s east to look into restarting output.

Shares of others, including Austria’s OMV and France’s Total, also rose.

Before the war, Libya produced 1.6 million barrels per day – nearly two percent of global supply – of which 1.3 million was exported and 85 percent of its exports went to Europe.

Oil industry experts anticipate it could take one year to restore output to at least one million barrels per day.

They base that and what happened in Iraq in 2003.

“Output was close to zero in the months after the US invasion,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. “The big question is how much damage has been done to the oil facilities in Libya where the fighting has gone on much longer than in Iraq. There’s a risk it may take a bit longer in Libya.”

Caroline Bain at the Economist Intelligence Unit said it could be two to three years before output in some of the more mature fields is restored.

Libya has Africa’s largest reserves of crude and post-war those who backed the anti-Gaddafi forces can expect to have greater access to them, including those like Qatar’s national oil company, while the rebels are warning Russian and Chinese firms can expect contract revisions.

“We don’t have a problem with Western countries like the Italians, French and UK companies. But we may have some political issues with Russia, China and Brazil,” said Abdeljalil Mayouf, information manager at Libyan rebel oil firm AGOCO.

About 75 Chinese companies operated in Libya before the war, involving about 36,000 staff and 50 projects, according to Chinese media.

Russian companies, including oil firms Gazprom Neft and Tatneft, also had projects worth billions of dollars in Libya. Brazilian firms such as Petrobras and construction company Odebrecht were also in business there.

“We have lost Libya completely,” Aram Shegunts, director general of the Russia-Libya Business Council, told Reuters. “Our companies will lose everything there because NATO will prevent them from doing their business in Libya.”