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.