18 March 2011 Last updated at 11:30 ET

Libya no-fly resolution keeps oil prices volatile

Continue reading the main story

Oil prices have fluctuated on Friday after the United Nations authorised a no-fly zone over Libya.

Brent crude earlier rose above $117 a barrel after the resolution, but suddenly dropped more than $3 to around $113 a barrel after Libya declared an immediate ceasefire.

US light, sweet crude was also higher, but came back, trading little changed at $101.48 a barrel.

Fighting in Libya has caused a rally in oil over the past few weeks.

The battles between forces loyal to Libyan leader Muammar Gaddafi and rebels have come after a series of popular uprisings across the Arab world, which also pushed up oil prices.

Libyan oil production - which goes predominantly to the European market, for which Brent is the leading price benchmark - is near zero.

Colonel Gaddafi's forces have recently retaken several towns seized by rebels in an uprising, but Western leaders had been talking on Friday about how to enforce the no-fly zone.

'Extended uncertainty'

However, analysts said the situation was still uncertain, despite news of a ceasefire.

"This does not mean we near a resolution of the situation in Libya," said Harry Tchilinguirian, an analyst at BNP Paribas.

"We may be facing the possibility of an entrenched status quo between pro and anti Gaddafi groups.

"This only maintains the uncertainty in terms of when we will eventually have a full resumption of production in Libya," he said.

Financial markets have been jittery all this week as events in the Middle East and Japan threatened to take a turn for the worse.

In Bahrain, a clampdown on protesters earlier this week raised concern that unrest could spread to neighbouring Saudi Arabia, the world's biggest crude producer.

Protests by a few hundred people in Saudi Arabia on Wednesday were put down by security forces.

The continuing nuclear crisis in Japan also continued to prey on the minds of investors, with concerns that the country is set to increase energy imports.

Japan's nuclear capacity - which accounts for nearly 30% of electricity generation - has been crippled following a devastating earthquake and tsunami.

Eleven of its 54 nuclear reactors are not operating.