The political disturbances in Libya is having an effect on the oil market. Oil prices are already at a two-year high and any disruption to supplies from Libya is liklely to push prices even higher in the coming days. Over the last week, protestors have been out in major Libyan cities calling for the Libyan leader, Colonel Muammar Gaddafi to stand down. In a speech yesterday, Col Gaddafi cut a defiant figure claiming he would rather die a martyr than abdicate power. There have been reports of troops and police firing on the protestors, of helicopters firing  from the air and of hired mercenaries sniping from rooftops. Whilst information is hard to verify it does seem that the country is in some chaos.

The unrest has led a number of oil companies to suspend operations in the country. Libya holds around 4.4 billion barrels of oil and produces 1.8 million barrels per day according to data from the US Energy Information Administration (EIA). It is the world's 12th-largest exporter of oil. Since the disturbances began, oil production in the country has fallen by around 20 per cent. BP, Eni of Italy and Spain's Repsol YPF have all suspended operations in the country and BP are making arrangements to fly foreign workers out of the country while the unrest continues.

The instability in Libya is causing some concern on the oil market where prices rose to $108.70 a barrel for Brent crude and US light sweet crude rose by 2 per cent to $95.45 a barrel. The Saudi oil minister Ali Maimi said that the Organisation of Petroleum Exporting Countries (OPEC) would expand production to ease supplies if there were problems but insisted that there was no immediate concern over oil supply.

The markets are not just concerned about Libya, however. Political unrest across the Middle East, which began with Tunisia then Egypt, Bahrain, Yemen and now Libya, has threatened the stability of the region. The UK Prime Minister, David Cameron admitted in a speech in Kuwait yesterday (Tuesday) that western governments had often supported repressive regimes as a trade-off for political and economic stability. Some traders have expressed concerns that the unrest could even spread to major oil producers like Saudi Arabia and if it does then the world could be in for a considerable shock.