Rebels repel assault on Misrata, five dead
Rebel fighters ride on a tank captured from Libyan leader Muammar Gaddafi's forces in Benghazi. REUTERS

WTI oil prices are pushing $108 per barrel and Brent prices are nearing $120 per barrel. Such prices are unsustainable, according to Credit Agricole.

If they persist, global economic growth will slow. By year-end, global oil demand (and thus oil prices) will collapse.

Oil prices are currently driven to extreme heights due to the ongoing conflicts in the Middle East/Africa. Libya's oil production has been cut to 400,000 barrels per day in recent weeks compared to 1.6 million before the conflict.

Normally, other countries can pick up slack. However, combined with the threat of disruptions elsewhere in the Middle East/North Africa, supply fears remain.

Moreover, speculators are betting on higher oil prices, thereby pushing prices higher in a self-reinforcing cycle.

If the conflict in Libya and other places die down – and oil fields are left largely undamaged – production can resume and prices will fall. If not, the demand-collapse scenario described above could play out.

Either way, oil prices likely won’t be this elevated for too long, according to Credit Agricole. Moreover, due to the large participation from speculators, the downward correction may be violent and severe.

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