Crude slides on Libyan output

Oil prices have fallen sharply today, after Libya said its oil output would increase and as Syria prepares to offer UN inspectors access to its chemical weapon plants.

The price of crude oil has risen only once this week, and that was yesterday after the Fed surprised the market by deciding against any reduction in its stimulus and as inventory data showed a big decline in US crude oil supplies. It’s a different story today, as market attention has switched back to the improving geopolitical factors for oil in the Middle East and North Africa.

Libya’s El Feel and Sharara oil fields re-opened this week, after having been shut down by protesters at the end of August. Together the oil fields offer up to 440,000 barrels of oil a day, a major portion of Libya’s total output. The disruption by protesters at oil fields and ports led to Libyan oil production sinking as low as 200,000 barrels a day, which has contributed to recent hikes in global oil prices.

The Libyan Oil Ministry today said that oil production is expected to expand to 700,000 barrels a day with the re-opening of the major oil fields in the west of the country and the lifting of force majeure at western terminals. This is still less than half of what would be considered to be typical output for Libya.

Arrangements to deal with Syria's chemical weapons appear to be progressing. Syrian president Bashar al-Assad said in an interview with Fox News that destroying his regime’s chemical weapons was technically ‘a complicated operation’ and could take up to a year, but that meeting conditions for international inspectors was no problem.

Russia President Vladimir Putin said today that he is confident that Syria will take steps to come in line with the International Chemical Weapons convention. Syria borders oil-rich Iran and Iraq.

In a further easing of tensions in the Middle East, Iranian President Hassan Rohani has stated that Iran will not develop nuclear weapons.

By mid-afternoon in New York, crude oil futures were trading down over 1% at $105.65 a barrel.

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