Following the continuing rage and protests in Libya, oil prices have started skyrocketing even as stakeholders in the oil sector are beginning to get worried.
“If we lose Libyan production, then you will have to replace around 1.6 million barrels per day of very good quality crude, which would introduce logistical implications and have a cost,” Credit Agricole CIB analyst, Christophe Barret, said.
Following the continuing rage and protests in Libya, oil prices have started skyrocketing even as stakeholders in the oil sector are beginning to get worried.
“If we lose Libyan production, then you will have to replace around 1.6 million barrels per day of very good quality crude, which would introduce logistical implications and have a cost,” Credit Agricole CIB analyst, Christophe Barret, said.
The disruption in Libya, which pumps 1.6 million barrels per day or nearly two per cent of global supply, marks the first cut in oil supplies related to the recent wave of protests in North Africa and the Middle East.
“People are scared to lose a producer that pumps very good quality crude. Companies are cutting production at the fields and there are difficulties at the port, so products trade is also disrupted,” he added.
The disruption could push up Brent crude prices to a greater extent because of its tighter availability and geographical proximity to the unrest, Comers bank analysts said.
Governments across the world moved to send planes and ships to evacuate citizens from Libya, whose leader, Muammar Gaddafi, has vowed to crush a revolt against his 41-year rule.
Between 300,000-400,000 barrels per day of Libyan output has been shut down, according to Reuters calculations, while Barclays analyst, Amrita Sen, said in a note that around one million bpd of Libyan crude oil production was likely to have been shut in.
Focus was also on top exporter Saudi Arabia, where ruling King Abdullah unveiled a package of benefits worth billions of riyals to mark his return on Wednesday after months of medical treatment abroad.
Jittery investors are worried about further supply disruption if protests spread in the country, which supplies around 10 per cent of the world’s oil and holds most of the world’s spare capacity. On Tuesday, Saudi stopped short of pumping more oil to calm markets, saying prices were driven by fear.
While protests in Saudi Arabia have so far been low key, Shi’ites in neighboring Bahrain are demonstrating against the Sunni-led government, fanning worries this could spill over to the Shi’ite minority in Saudi’s oil-producing eastern province.
“The importance of Bahrain is perhaps being underplayed currently. While not a major oil producer, Bahrain’s impact on the oil market reverberates through its importance in Saudi Arabia,” Barclays Capital analysts, Helima Croft and Amrita Sen, said in a note.
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