Global oil prices rose sharply on Monday after the initial round of western bombing against Libya was met by Libyan leader Muammer Gaddafi’s promise of a “long, drawn-out war”, which traders fear will keep the north African nation’s oil from the market.
Libya is one of the world’s largest oil exporters and a member of the Opec oil producers’ cartel. Production has already dropped to a trickle, down from a pre-crisis level of 1.58m barrels a day, according to the International Energy Agency, the watchdog.
ICE April Brent, the global benchmark, jumped more than $2 to a session high of $116.19 a barrel and in early afternoon trading was up 1.6 per cent to $115.75, approaching the 2½-year high of almost $120 barrel set in late February. In New York, Nymex April West Texas Intermediate rose 1.9 per cent to $103.03
“A long, drawn-out conflict at this point seems likely,” said Mohammed El-Katiri, analyst at consultants Eurasia Group, saying that in none of the main scenarios of the unfolding conflict “will Libyan oil exports make a rapid recovery”.
Ahead of the start of the bombing campaign, the Paris-based IEA warned that Libya’s oil production will remain off the market “for a considerable time”. The western countries’ oil watchdog said in a monthly report that exports were likely to be off for “months rather than weeks” due both to “war-inflicted damage on oil infrastructure” and a tightening of the international sanctions regime.
The price surge was further supported by unrest in Bahrain, the tiny Gulf island kingdom near Saudi Arabia, and elsewhere in the Middle East region, including Yemen and Syria.
The oil market is increasingly concerned about a cascade of events in the region, which started with regime changes in Tunisia and Egypt, hit oil-rich Libya last month and is now engulfing Bahrain, which lies only a few kilometres away from the world’s biggest oilfields in Saudi Arabia, the largest oil producer.
Saudi Arabia has boosted oil production to bridge the gap left by the shutdown of Libyan exports. Other influential members of Opec, including Kuwait and the United Arab Emirates, have also increased their production to offset the shortfall.
The IEA said that Riyadh pumped on average 8.9m b/d in February and that production at the end of the month had reached 9.1m b/d, up from 8.5m b/d in December. The UAE boosted production to 2.5m b/d last month on average, up 100,000 b/d from two months ago, while Kuwait also increased its own output by nearly 100,000 b/d from December to average 2.4m b/d in February.
“Key Gulf producers, led by Saudi Arabia, with spare capacity are already ramping up output and are prepared to increase supplies further depending on market demand,” the IEA said.
But the watchdog said that Opec, which controls about 40 per cent of global crude oil supplies, appeared “unwilling” to formally raise its output targets ahead of the next scheduled ministerial meeting in Vienna on June 2.
Libya is one of the world’s largest oil exporters and a member of the Opec oil producers’ cartel. Production has already dropped to a trickle, down from a pre-crisis level of 1.58m barrels a day, according to the International Energy Agency, the watchdog.
ICE April Brent, the global benchmark, jumped more than $2 to a session high of $116.19 a barrel and in early afternoon trading was up 1.6 per cent to $115.75, approaching the 2½-year high of almost $120 barrel set in late February. In New York, Nymex April West Texas Intermediate rose 1.9 per cent to $103.03
“A long, drawn-out conflict at this point seems likely,” said Mohammed El-Katiri, analyst at consultants Eurasia Group, saying that in none of the main scenarios of the unfolding conflict “will Libyan oil exports make a rapid recovery”.
Ahead of the start of the bombing campaign, the Paris-based IEA warned that Libya’s oil production will remain off the market “for a considerable time”. The western countries’ oil watchdog said in a monthly report that exports were likely to be off for “months rather than weeks” due both to “war-inflicted damage on oil infrastructure” and a tightening of the international sanctions regime.
The price surge was further supported by unrest in Bahrain, the tiny Gulf island kingdom near Saudi Arabia, and elsewhere in the Middle East region, including Yemen and Syria.
The oil market is increasingly concerned about a cascade of events in the region, which started with regime changes in Tunisia and Egypt, hit oil-rich Libya last month and is now engulfing Bahrain, which lies only a few kilometres away from the world’s biggest oilfields in Saudi Arabia, the largest oil producer.
Saudi Arabia has boosted oil production to bridge the gap left by the shutdown of Libyan exports. Other influential members of Opec, including Kuwait and the United Arab Emirates, have also increased their production to offset the shortfall.
The IEA said that Riyadh pumped on average 8.9m b/d in February and that production at the end of the month had reached 9.1m b/d, up from 8.5m b/d in December. The UAE boosted production to 2.5m b/d last month on average, up 100,000 b/d from two months ago, while Kuwait also increased its own output by nearly 100,000 b/d from December to average 2.4m b/d in February.
“Key Gulf producers, led by Saudi Arabia, with spare capacity are already ramping up output and are prepared to increase supplies further depending on market demand,” the IEA said.
But the watchdog said that Opec, which controls about 40 per cent of global crude oil supplies, appeared “unwilling” to formally raise its output targets ahead of the next scheduled ministerial meeting in Vienna on June 2.
13 comments:
It appears there will not be an abundance of oil coming into the market from Libya. Although this will raise gas prices and the prices on all other oil related prices, I believe this will push the world in a postitive direction. Hopefully this will make the world less relient on oil, and force us to look for new energy resources.
This seems to be the market responding to an event naturally, pretty much. Though unfortunate on several counts, it's not at all surprising that the price of oil has gone up here; that tends to happen when a country with a major oil industry is engaged in armed conflict.
Well this is blog attempt number two. Oops, I accidentally tried to post without logging in.
Anyway, this article is not a pleasant read because gas prices are already high and I, and most everyone, don't want them to go any higher. Yet, the people quoted in this article see no relief in these high prices because they see no relief coming soon in Libya. Interesting though is the fact that other OPEC producers are trying to pick up some of the slack to lessen the impact of the war. I find this interesting because this will lower prices, something usually these countries are definitely not opposed to. Of course, this only emphasizes their belief that this conflict may last a while, a situation that if they didn't act now would only be negative for them.
Its just so shocking how the gas prices have given a high jump just within a month. This is all due to the western bombing against Libya. Libya, one of the largest oil exporters has already dropped its production. This is going to result in a great loss for us. Now since the production has decreased to a great extent it will be very hard for Libya to return back to its original position in the industry.
All i can say is that i am not looking forward to upcoming gas prices...
Why can't we all just be friends????
I think that the efforts to counteract the drop in supply is good but there is definitely a greater need for an increase in oil production. If we want to get out of this crisis without having to pay 100 dollars a gallon for gas we are going to need a lot of nations to step up and commit to seriously increasing oil production. I dont understand why opec wouldnt raise its output targets. that just seems stubbornly stupid. An increase in output is obviously needed. Why wouldnt they charge their member countries with that goal?
it is inevitable that this was going to happen and surely it is bound to get worse. oil is a source that is diminishing rapidly and our alternatives for transportation are not progressing that well. i mean seriously i looked up the prices of hybrid cars on cars.com and found the cheapest one to be 23,000!! How can a modern middle class family afford that for the parents and however many kids they have? i hope this opens the eyes of americans that we cant just go around taking more and more resources from our beautiful planet. i'm not the "greenest" person by any means but we need to make an affordable car available to all the american people so they can buy it and save some oil!
I think the fact that they are pumping out more oil to compensate for lyberia, is a good temporary fix. It shows that opec is willing to help in this time. It also shows that they are willing to be a little bit more cooperative,then they have been in the past. It helps for the time lyberia is out of the game.
So, if the oil is going to be off the market for awhile it means that ts most likely going to hurt Libya economically. A bombing in Libya has set them back.
Saudia Arbia is having to make twice as much just feel the gap that Libya left open by not being able to produce their oil.
Global prices for oil are rising, hopefully since other places around Libya are pumping more oil it might go down? who knows.
Good thing Kuwait and United Arab Emirates are helping to set offset the shortfall that the other nation is having.
Before this happened I would not have believed that Libya had this much influence on oil. I do believe that the regime change is a good thing for the world even though it is having this effect on oil production.
The increased violent activity in the Middle East is concerning, but the rise in oil prices only draws attention to the fact that we are too dependent on the resource. We need to ween ourself more dramatically off of oil, and invest more money in other solutions.
I think that America should just open the reserves are provided for us. We have enough oil to last us years and yet we aren't using any of it because people are saying it's bad for the United States. What I think is bad it that we are depending on a foriegn country to provide for us something that we don't even need from them! Especially now that we are on bad terms with them, I think that we should disconnect ourselves from Lybia and just provide for ourselves.
This is no surprise to me that oil prices have gone up since the u.s. became involved in libya military wise. Prices started going up 2 months ago since the whole libya crises started. However something needs to be done to control the escalation of these prices, or atleast raise there output levels. If nothing changes and oil prices continue to go up it will only cause more problems internationally.
Oil is a natural resource that is slowing draining without an alternate energy source. OPEC gives me a sense of unrest that they will soon back stab America and force our economy into a recession. They have a vise around us that we cannot control. Without their cooperation we could be screwed.
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