US envoy's death in Libya shakes crude market The shockwaves of the death of the US ambassador to Libya are spreading to the oil market. Until now, the faster-than-expected recovery in Libya's oil production after last year's civil war has been a bearish influence on crude prices. But a worsening security situation affecting production threatens to push prices higher. The latest unrest comes amid signs that the recovery has stalled. Crude oil output fell to negligible levels between June and August last year as the conflict in Libya intensified. But after the death of Muammer Gaddafi in October, the turnround in output recovered faster than most expected. Yet, oil production numbers show that output remains below prewar levels. The International Energy Agency, the western countries" oil watchdog, estimates Libyan oil output at 1.38m barrels a day in August, below the 1.65m b/d that the country pumped before the start of the war and well below the most recent peak of 1.8m b/d set in 2008. What is more, the rapid recovery witnessed between October and March has now come to a halt, with output hovering around 1.4m b/d since April due to lack of spare parts, service companies and unrest in the oil-rich eastern Libya. Libyan officials have most recently targeted October as the month when output would fully match levels produced before the civil war, but the market remains sceptical. Omar Shakmat, the country's deputy oil minister, recently said the main problem was the delayed return of oil services companies. Civil unrest is also playing a role. Oil production suffered a 48-hour stoppage after protesters surrounded the country's main export terminals of Es Sider, Ras Lanuf and Brega in July. Earlier in the year, the headquarters of the Gulf Oil Company, or Agoco as the Benghazi-based subsidiary of the state-owned National Oil Company is known, were blocked for days by protesters, cutting output. Libya has yet to repair all the facilities damaged during the war, including the oil terminal of Es Sider. The refinery at Ras Lanuf, the country's largest, only restarted production last month, nearly a year after the collapse of the regime. Now the worry is that the recent worsening security in Benghazi, the main oil city, and the capital Tripoli could further delay the recovery in oil production - and even cut output. The industry has had already several warnings. The head of the joint venture led by Repsol of Spain - the largest foreign sector producer in the country - was kidnapped in May. He was released after only a day, but the incident underlined the precarious security situation in Libya. The killing of the US ambassador and several other staff can only reinforce the sense that the recovery of the oil industry in Libya is still on shaky ground.