Oil dips on prospect that Libya crude will return

International oil prices fell Monday on the prospect that exports from Libya will return to the market at a time of economic weakness.

It will be at least several months before Libya is producing enough oil to start exporting it again. But any extra shipments could lower the price of gasolene, which has already come down more than 40 cents a gallon from its peak in May.

Brent crude, which is used to price many international oil varieties, dropped 92 cents to US$107.70 per barrel in London.

US benchmark crude fell briefly, then rose US$1.01 to $83.42 per barrel in New York as traders used a financial strategy to take profits.

Traders are considering the possibility that Libya's six-month rebellion could return more oil to markets. Over the weekend, rebels overran forces loyal to Moammar Gaddafi and claimed control of much of the nation's capital. Gaddafi's whereabouts were unknown and two of his sons were captured by rebels.

The ouster of Gaddafi, who ruled the North African nation for four decades, would clear the way for a new government and a return to oil production, which stopped during the conflict.

Libya sits on the largest oil reserves in Africa.

Uncertain restart date

Before the uprising, it was the world's 12th largest exporter, delivering more than 1.5 million barrels per day to mostly European markets.

How quickly its production can be restarted depends on a number of factors, including how fast the rebels form a government and how soon international oil companies move workers back to Libya. It will also take time for the nation's oil fields and pipelines to come up to full speed.

Technicians from Italian oil company Eni were already working to restart oil and natural gas production in Libya, according Italian Foreign Minister Franco Frattini. Eni is the largest foreign producer in the country.

Eni declined to elaborate on the comments, but noted that restarting production could take some time - a couple months for natural gas and even a year for oil.

Repsol, another big producer in Libya, was not reachable for comment.

In other Nymex trading for September contracts, heating oil lost less than a penny to US$2.8954 per gallon and gasolene futures dropped 3.67 cents to US$2.8045 per gallon. Natural gas fell 4.9 cents to US$3.891 per 1,000 cubic feet.