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8/22/2011

With Gadhafi out of power, oil prices should fall

Oil prices around the world should start falling if Libyan rebels succeed in toppling Moammar Gadhafi's regime, though the full effect won't be felt for months.
Crude prices fell on Monday on hopes that Libya would soon resume oil output. A grim outlook for the economy also helped depress crude prices and sent gold soaring to a new record high of $1,900 an ounce.
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.

Benchmark Brent crude prices wilted as Italy's foreign minister said oil company ENI has already sent staff back to the country to look into the restart of production.

"Brent is taking more of a battering but that's only to be expected," said Christopher Bellew, a trader at Jefferies Bache.

Libya pumped around 1.6 million barrels per day (bpd), nearly 2 percent of global supply, before the war cut output. Most of Libya's high-quality crude flowed to European refiners, but after Libyan exports ceased, tighter supply drove Brent to a two-year high of $127.02 in April. Output has fallen to almost nothing during the conflict.

Brent crude fell as much as 3.2 percent to a low of $105.15 a barrel and later recovered to $107.05 as the dollar weakened. U.S. crude was up 0.9 percent to $83.03 a barrel after dropping to as low as $81.13. The front-month September U.S. crude contract expires on Monday.

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