ZAWIYAH, Libya - The bullet holes in the oil tanks have been patched, the damaged backup generator is being repaired, and most important, the pipeline that feeds the giant oil refinery here has been reopened.
Oil production is quickly being restored in Zawiyah and around the country, in large part because both the Qaddafi regime and the former rebels, now the interim leaders of Libya, took pains to avoid permanently crippling the country's most important industry during their six-month civil war.
"Qaddafi wanted to keep the refinery going because he needed the fuel, and the rebels wanted the refinery safe because it belongs to the Libyan people," said Khaled Rashed, shift coordinator at the Zawiyah refinery's control room.
Libya's oil production remains at about 40 percent of the level that it was before the revolution began. But none of the country's 40 critical oil and gas fields were seriously damaged in the war, according to Libyan officials and international oil experts. Now, most of the important oil ports and refineries, virtually idled by international sanctions and months of fighting, are ramping back up.
Officials boldly predict that by June, the country will once again be pumping 1.6 million barrels of oil a day, although independent experts say that is conceivable only if the country can avoid a relapse into violence.
David Fuller's view This is good news for war-ravaged Libya and also the global economy which will remain vulnerable to spikes in the price of crude oil until more of the world's shale reserves are developed and output from alternative forms of energy is considerably higher.
Brent (weekly & daily), which should be affected by an increase in supplies from Libya and WTI (weekly & daily) rallied back to uncomfortable levels for the global economy in recent weeks. Fortunately, Brent's rally has been turned back by resistance near the September high and a close above $117 would now be required to offset current scope for a decline closer to the August and October lows near the psychological $100 level. For WTI, $100 represents psychological resistance and today's reversal of yesterday's surge suggests that this somewhat overstretched rally is losing momentum.
Interestingly, the unweighted Continuous Commodity Index (Old CRB) (weekly & daily) encountered resistance beneath its top area in late October and has now retraced nearly half of the rally from last month's low. This is important because a commodity reset at lower levels would hasten an easing in monetary policy by growth economies. That would help to first stem and then hopefully reverse the contraction in global GDP growth.