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Thursday, February 24, 2011

Guns, Swords, And Oil

What we may have to be calling the Libyan Revolution continues to dominate the news.  Reuters reports that rebel forces have seized important cities near the capital of Tripoli, including Misrata (the third largest city in Libya) and Zawiyah )an oil terminal just 50 km west of Tripoli).  Pro- and anti-Gaddafi forces (including, according to some reports, the Libyan army) are reported to be clashing.  "It is chaotic there," stated Mohamed Jaber who passed through Zawiyah on his way to Tunisia, "There are people with guns and swords."
Al Jazeera is reporting that "major swathes of territory in the east of the vast North African country now appear to be under the control of pro-democracy protesters."  They also report soldiers firing on protesters in Az Zawiyah with "heavy artillery", killing as many as 100 protesters and injuring 400 more.  They also confirm the Reuters report that pro-Gaddafi forces (called the "Hamza brigade") attacked Misrata, but that so far the revolutionaries have held the town in the face of "heavy machine guns and anti-aircraft guns".  They also state that the protesters/revolutionaries control the coastline from the Egyptian border to the cities of Tobruk and Benghazi.
One effect this has had on the international market is to drive up April oil futures internationally.  The price per barrel hit $119.79 intraday before falling back to around $114 per barrel.  On an average day, Libya produces 1.6 million barrels of oil.  The revolution[1] has cut that production by at least 25%.  Analysts are concerned that if the disruption continues it will force prices up further, because OPEC's "spare capacity" may be unable to absorb the losses.  One Reuters analyst feels that we could see oil hit $158/barrel.
So, naturally, the US indexes are green at this moment.  Go figure.
[1]  Because, really, once the swords and the guns come out, it's hard to call it a "protest" with a straight face.

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