Oil prices rebounded on Thursday, the 17th of March 2011 after the United Nations (UN) passed a resolution calling for the imposition of a no-fly zone over Libya. At the time of market closure on Thursday, Brent was priced at USD $ 113.93 per barrel, WTI was at USD $ 101.42 per barrel, while West Texas Sour, Midlands was at USD $ 97.17 per barrel.
After almost a month of deliberating over the pros and cons of attacking Muammar Qadhafi’s air force fleet in order to help the rebels topple the embattled leader, the United States finally agreed to take part in an international military intervention in Libya. Britain and France aggressively pushed for a UN resolution for the no-fly zone, after Qadhafi’s forces had retaken control of almost all the rebel towns, and were on the outskirts of the rebel headquarters at Benghazi. The international community is concerned that Qadhafi would carry out mass killings to avenge the people who have challenged his rule, hence the decision on humanitarian grounds to attack Libya’s ill equipped air force fleet. Although the oil prices had been falling since last week on account of the expected fall in oil demand from Japan, the imminent military intervention in Libya became the major factor causing a spike in oil prices.
Oil production in Libya had already fallen by more than half of its production capacity of 1.8 million barrels per day. Even though OPEC had increased its production to offset the loss in supply from Libya, many analysts believe that OPEC has already exhausted its spare production capacity. With the Libyan crisis appearing to be dragged on for months, and an increase in oil demand for the summer season, oil prices are expected to remain on the higher side in the coming days.