Saudi Arabia and other OPEC countries could shoulder the burden and stop global oil prices from skyrocketing should unrest in Libya continue.
“If it’s going to be a short term issue, there’s a lot of oil right now – Saudi Arabia could ramp up [production] very easily, could do four million” barrels per day, Kate Dourian, Middle East editor for Platt’s, told Arabian Business.
Oil has hit its highest rate since fall of 2008 on the Asian markets, and could rise further, Dourian said.
“It’s difficult to predict because nobody really knows what’s going on inside. But you’ve also got tensions in Iran and OPEC Algeria, and that’s adding to the geopolitical risk factor in the oil price.”
According to the CIA World Factbook, Libya is the world’s fifteenth-largest exporter of oil, producing 1.8mn barrels per day – with 1.4mn of them exported.
An estimated 90 percent of the oil is dug from the eastern side of the country, currently a hotbed for activism and violent suppression by the Libyan government’s armed forces.
The crackdown has led foreign oil workers, including 18,000 Indians, to evacuate.
“We’re going to start to see an impact on production because all the companies are evacuating,” Dourian said. “We’ve already seen one company stop production.”
Due to Western reporters’ inability to get into Libya and a lack of communication from inside the low-tech country, “we don’t really know what’s going on because there’s no communication and everything’s been cut.”
As of last Monday, Al-Nafoora oil field, one of the country’s biggest, was operating with half of its regular staff, and other fields looked to follow suit.
“We haven’t seen an impact on exports of oil, but ports have [intermittently] been closed, and one’s remained closed since Monday night,” Dourian said. “There’s pressure on imports because people can’t communicate with Libya.”
The supply and demand balance still seems stable, despite the blackout from one of the world’s major exporters.
On February 7, a senior Gulf official told Platts that Saudi Arabia was ready to supply more oil to the market, but only if there was demand from customers. The source described the market as being in "good shape" and that the recent rise in global oil prices to their highest levels in 28 months had not been driven by supply/demand fundamentals.
But that was before Libyan protests had gone from the incubator stage to what some officials are calling full-on genocide.
“It’s going to make the supply and demand balance tight – but it’s not going to change the balance in fundamentals because OPEC is producing a lot of oil,” Dourian said. “Obviously prices will go up. It’s a lot of oil [that will be missing from Libya].”For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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