Lack of Libyan oil shakes world market
By Selen Tonkus, Wednesday, May 21, 2014
ANKARA – Oil production may be halted in Libya as political turmoil threatens to drag the country into civil war, experts say.
Forces loyal to renegade general Khalifa Haftar have been fighting the Libyan army in Benghazi in the east since last Friday, leaving 75 people dead.
The conflict spread to the capital, Tripoli, on Sunday, when fighters stormed the parliament and kidnapped several lawmakers.
Amid the escalating conflict, the price of oil reached above US$110 a barrel on Tuesday after gaining nearly two percent last week, as the threat of further violence threw into question the country's ability to export.
Libya has begun exporting oil from two of its four terminals only recently.
Rebels composed of ex-port guards and some Libyan tribes seized four ports in the east in July last year, and demanded autonomy and a fairer distribution of oil revenue.
Libya's oil production, estimated at 1.4 million barrels a day before the beginning of the crisis, fell sharply to about a fifth of its previous volume by the end of February.
The country was expected to resume producing oil in large amounts after rebels reached an agreement with the Libyan government last month.
However, it is not clear whether the two open terminals are still functioning, said Washington-based Wilson Center expert David Ottaway.
Meanwhile, Saudi Arabia has said it will make up the difference from any loss of Libyan exports and has already stepped up its production to just under 10 million barrels a day, he noted, adding: "So I do not see any big impact from the loss of even all Libyan oil from the market."
- Saudi oil 'no alternative'
However, London-based Global Resources Corporation President Mehmet Ogutcu said the reason behind the oil price rise is that Saudi oil can be no substitute for Libyan oil, especially for Europe.
Another reason is that market had given up hope of a supply of Libyan crude, he added.
When asked about future provisions, Ogutcu said the market should prepare itself for the fact that a large flow of Libyan oil was no longer possible, as the country faces a descent into civil war.
- US$5 increase
California-based Post Carbon Institute expert Richard Heinberg also agreed that the political situation in Libya appeared to be worsening.
While the situation has not yet seriously affected world oil prices, it was putting put pressure on a fragile system, he said.
While pointing out that OPEC is widely believed to have spare production capacity - almost entirely in Saudi Arabia - he claimed the Saudis had not responded quickly to other recent supply crises.
Therefore, he said, if the Libya production halt persisted, it would seem highly likely that it would result in at least a small an increase in prices - perhaps in the range of US$5 in the already historically high global oil price.
- Struggling oil production
London based Energy Aspects expert Richard Mallinson also said the recent fighting and political chaos risked descending into civil war.
Mallinson said Libya’s production would struggle to rise above 0.25 million barrels a day on a monthly average basis for the rest of 2014, given the serious and worsening instability.
Touching upon the possibility of secession of the oil-producing east from the Tripoli government, Mallinson said that, although the eastern federalists have expressed support for Khalifa Haftar, the latest developments could make it harder for the federalists to secure political concessions as the government in Tripoli had become so unstable.
But June 25 parliamentary elections may see the eastern region gaining more of a share of political influence and oil revenues, he said.
OPEC data suggests that Libya is the largest oil country on the African continent with 48 billion barrels of proved reserves - the ninth in the world.
Europe buys 10 percent of its oil from Libya.
Copyright © 2014 Anadolu Agency