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Libya falls to rebels, oil set to drop

Oil prices could fall dramatically when markets resume later tonight as Muammar Gaddafi’s Libyan regime appears to have collapsed without much resistance.

Agencies report from the capital Tripoli that rebel forces now occupy much of the city, including central Green Square, where the dictator once held huge rallies. Two of Gaddafi’s sons, including Saif al-Islam, have been arrested.

The Presidential Guard is is reported to have surrendered. Sky News, CNN and other broadcasters have showed scenes of jubilant crowds gathered in the square, which has been renamed Martyrs' Square, with many waving the red, black and green flag of anti-regime forces.

Oil analysts say prices will drop in “a sign of relief that conflict has come to the end.” But one, Andrew Lipow, says it will take time for the market to erase the hefty price increase that resulted from the suspension of Libyan oil exports since the rebellion began in February.

Libya used to export about 1.5 million barrels of oil a day, almost all of which have been cut off. Although Libyan oil amounts to less than 2% of world demand, its loss affected prices because of its high quality and suitability for European refineries.

The shortage has sent Brent oil, based on the European benchmark, to a premium of about $US25 a barrel over the North American equivalent.

Analysts estimate the uprising in Libya has increased oil prices by $US10-20 a barrel.

The European refineries have struggled to make up for the production loss despite an increase in supplies from Saudi Arabia. As a result, European markets should see the first and most significant drops in oil prices.

After-hours electronic trading on the Nymex shows crude for September delivery at $US81.56 a barrel for North American oil, down from Friday’s $US82.26. The more actively traded October contract is at $US81.70.

Brent oil for October settled at $US107.37 on the London-based ICE Futures Europe exchange at the end of last week.

Earlier, Nato Secretary-General Anders Fogh Rasmussen said the Libyan regime was “crumbling” and that its bombers would attack if it made “any threatening moves towards the Libyan people.”

Mr Fogh Rasmussen said the sooner Gaddafi “realises that he cannot win the battle against his own people, the better.

The Libyan people have suffered tremendously under Gaddafi’s rule for more than four decades. Now they have a chance for a new beginning,”

Nato warplanes have flown nearly 20,000 sorties in the past five months, including about 7500 strike attacks against Gaddafi’s forces.

More by Nevil Gibson and agencies

Comments and questions

Move the NATO forces over to Syria

Already sitting off shore aren't they?

time to go long december crude

Where is Gaddifi? Are they going to have a public execution in Martyrs' Square?

Gaddifi is hiding in tunnels under Martyr's square

Now watch the oil companies looking for another excuse to put the price of oil back up. Sorry to be a cynic experience tells me this!

We await a major drop in the price of fuel at the pump - sooner rather than later!

No harm in waiting. Blessed is he who expecteth little for he shall not be disappointed.

Nevil that's all good in theory, and you are right, the oil price ought to drop.
What are the bets on the price of petrol and diesel at the Kiwi pump? 50:50 that it goes up or down.
I don't have access to the stats you will have on the prices at the pump of oil @US$140 vs today and vs what it should be when it drops below $80.
Sure there's the extra 2.5 cents gst and Dr "Dick" Smith's Gillard carbon tax for global "warming".
But with the connivance of Key and English, the local petrol retailers have treated the oil price as completely disconnected from the price at the pump. Get your lads and lasses on to it and get them to ask some (hopefully embarrassing; although I believe they are all in cahoots) questions.
This has been a scandal. My amateur in-the- head calculations would have petrol another 35-40c cheaper, with the Libyan effect yet to come...and because it's a downer (on paper) that will be halved on the way down.
Isn't the AA (BP's favourite associate) supposed to do this?

Oil will go down, but then will creep up again to a higher price than it is now before the year is out.

Oil price drop? Are you kidding? The oil companies are making millions of dollars in profits every hour and you honestly expect them to drop their prices? They have used the threat of peak oil and now the wars that are happening to explain the price increases. I'm waiting for one of them to drop the crap and say it straight. They are greedy and want to make as much money as possible and hold the world to ransom. as we know without oil the world as it currently stands would stop, and they know this. Its the same business model that Fonterra has adopted