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Oil prices drop as Libyan rebels sweep into Tripoli

• Brent crude down to 5
• Analysts believe Libya could soon resume oil exports
• European stock markets mixed after last week’s falls

Oil prices dropped sharply on Monday after rebels swept into the heart of Tripoli, raising expectations that Libyan oil exports could resume soon.

As a battle raged at Muammar Gaddafi’s complex in the Libyan capital, Brent crude dropped more than to 5.15 a barrel, a fall of 3%, while US crude was down almost a dollar at .30, a 1% drop.

Analysts believe Libya could be pumping as much as 1m barrels a day within months. Before the war halted exports, Libya was pumping some 1.6m barrels a day – nearly 2% of global supply. Most of it flowed to European refiners, and tightening supply after Libyan exports stopped in the spring drove Brent crude to a two-year high of 7.02 in April.

The FTSE in London fell more than 35 points in early trading, taking the index briefly through 5000, before turning positive, trading 20 points higher at 5060. France’s CAC was up 0.6% while Germany’s Dax fell 0.9%. Asian markets were bathed in red, with the Nikkei in Tokyo losing 1%, the Hang Seng in Hong Kong falling 1.5% and the Jakarta Composite in Indonesia down 2%. There are growing expectations that Japan will intervene in currency markets to weaken the strong yen.

Investors scrambling for safe haven investments pushed spot gold prices to a new record of ,894 an ounce.

Markets are eagerly awaiting a speech from US Federal Reserve chairman Ben Bernanke on Friday in Jackson Hole, Wyoming. They will scrutinise his remarks for any hints on how America’s central bank will tackle the worsening economic outlook and turmoil in financial markets.

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