Libya Warns of $130 Crude
Source: Reuters (3/2/11)
"Libya's unrest has created its worst energy crisis in decades."
National Oil Corporation Chairman Shokri Ghanem said the country's troubles had created its worst energy crisis in decades and supply cuts to world markets could push oil above US$130/bbl in the next month if troubles persist.
Ghanem said oil output dropped to 700,000–750,000 bpd from a pre-crisis 1.6 Mbpd after the flight of most foreign workers who comprise ~10% of its energy industry's labor forces.
"The question is what will be the outcome over the next few days—will there be a full stoppage as the personnel evacuation from Libya continues?" asked BNP Paribas Head of Commodity Market Strategy Harry Tchilinguirian.
Some oil exports continued—two Greek tankers left Libya Tuesday, but concerns about potential violations of recently imposed U.S. sanctions left cargo sitting off the U.S.' Texas/Louisiana coast.
Risk of Contagion
Governments in Yemen, Oman, Iran and Iraq have clashed with protesters over the past fortnight as popular unrest has spread in the region holding more than 60% of the world's reserves.
"Oil prices are subject to the ebb and flow of Middle East news. . .there's a good chance of Brent rising to US$120 over the next couple of days," said CMC Market Analyst Michael Hewson.
Last week Brent crude futures rallied to higher than US$118 on disrupted supply from Libya, but fell back as a Saudi Arabian output boost was expected to fill in for the loss.
In the U.S., data released by the American Petroleum Institute showed a surprise fall in crude inventories and sharp drop in gasoline stocks Tuesday.
"Given the geopolitical tensions we are seeing in the Middle East, conventional bets on supply and demand. . .are off. The market's focus is on the bigger picture," said Tchilinguirian.