What will be the impact on financial markets of the revolution in Libya successfully overthrowing the country's dictator of 40 years? Prior to the war, Libya pumped out about 1.6 million barrels per day, but that has been reduced to about 100,000 during the conflict.
Here's a look at the top 20 oil producers in the world, with Libya coming in at #17:
Most of that Libyan oil (85%) headed to Europe:
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Back in February when the rebellion in Libya started, we saw a sharp climb in oil prices as Libya's production was ground to a halt. This affected Brent crude more so than light crude, as Libya produces the former, but both saw prices rise in the subsequent months.
The likeliest scenario now that we see the Qaddafi regime close to the end is that as Libya gets its production back online -and the rebels taking over will have every incentive to do so, and have already met with many foreign oil companies to get their expertise and help - we should see the big spread between Brent Crude and WTI Crude contract.
WTI light crude is almost back to its levels from October 2010, but as the chart above shows, Brent crude continues to trade near its levels from around this February, which was when the Libyan conflict began.
The pressure on oil price has been down recently, as investors and traders are concerned about global growth. If we have more supply enter the market, then Brent should ease further. Lower oil prices can help ease inflationary pressure, as Brent crude is used as the benchmark price for most of the world's oil consumption.
