Oil futures diverged Monday, with Brent crude sliding as Libyan rebels appeared on the verge of ousting Col. Moammar Gadhafi, while stronger equities supported U.S. crude prices.
Light, sweet crude for September delivery rose $1.42, or 1.7%, to $83.68 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange fell $1.67, or 1.6%, to $106.95 a barrel.
Libyan rebels seized control over most of Tripoli Monday, raising hopes that the six-month long conflict was nearing an end. Libya exported 1.3 million barrels a day of crude before the outbreak of civil war in February, and the removal of those exports have been a major factor behind Brent crude's ascent past $100 a barrel this year.
"Assuming that the new government coalition can keep the peace, we can probably see within a very short period of time 50% of their production come back online," said Phil Flynn, oil analyst at PFG Best in New York.
Western governments called on Gadhafi to step down immediately, and the European Union said it was ready to begin offering assistance to a post-Gadhafi regime soon. Still, the Libyan leader's whereabouts remained unknown as of Monday, and many analysts cautioned against predictions of a quick return of the country's oil exports.
"The eventual demise of the regime does not necessarily equate with an immediate and full resumption of Libya's oil supply," said Harry Tchilinguirian, head of commodity derivatives research at BNP Paribas.
Moreover, the resumption of Libyan exports could be met with cutbacks elsewhere. A senior Gulf official from the Organization of Petroleum Exporting Countries told Dow Jones Newswires that Saudi Arabia will adjust its oil exports as needed as Libya resumes production.
Saudi Arabia, OPEC's leading producer, hiked production to as much as 10 million barrels a day in June after Libya's exports were removed from the market.
The divergence of Nymex and Brent crude futures eased the gap between the two benchmark crudes, though it still remained at about $24 a barrel in early trading Monday. That's well above the historical level of about $2 a barrel, but below a record high of more than $26 a barrel hit last week.
The two crudes have pulled apart sharply this year, with Brent rallying on the back of supply disruptions in Libya and the North Sea. A glut of oil in the Central U.S., meanwhile, has weighed on Nymex crude.
Nymex crude futures, meanwhile, remained supported by a weaker dollar and stronger equities. U.S. stocks were 168 points, or about 1.5%m, higher at the open Monday, rising on the back of gains in European equity markets. The Dow had lost 593 points the previous two sessions to stretch its weekly losing streak to four weeks.
Front-month September reformulated gasoline blendstock, or RBOB, recently traded down 5.09 cents, or 1.8%, to $2.7903 a gallon. September heating oil traded down 2.14 cents, or 0.7%, to $2.8831 a gallon.