The Brent-WTI spread narrowed further yesterday, with the price differential currently around $6/bbl, as Libya continues to shake up the international oil market. “Libya, the holder of Africa’s biggest crude reserves, has become the smallest producer in the 12-member Organization of Petroleum Exporting Countries after protests halted production and shipments. Output shrank to 250,000 barrels a day last month, compared with 1.4 million a year earlier, according to a Bloomberg News survey of producers and analysts.” [Bloomberg]

Brent crude oil prices face downward pressure as Libya appears close to restarting significant export volumes and US light, sweet crude output continues increasing. Opec could reduce production as a result. “Oil output levels are beginning to ease off, and could do so further if Opec looks to manage supply in the face of weakening fundamentals. As a result, GCC hydrocarbon sectors are likely to make a smaller contribution to growth this year, which will dampen overall real GDP growth rates.” [Gulf Times]

The Economist provides solid analysis of Europe’s gas situation vis-a-vis Russia and Ukraine. “Rather than face the economic pain that a 30bcm gas shortfall would impose, Europe’s leaders will focus on helping Ukraine pay its bill. This is one reason why prices for traded gas have barely budged since the crisis started. Sorting out the country’s notoriously murky energy sector will be high on the reform agenda (Ukraine still does not have meters at the points where the pipelines enter from Russia, making all discussions about quantity and price questionable). Cuts in the energy subsidies which lead Ukrainians to burn gas so wastefully are sure to be required in return for money from the IMF. Ukraine currently produces 20bcm of gas; if it were as efficient in its use as some countries are, it could be more or less self sufficient.” [The Economist]