LIBYA’S OIL output has plunged by at least a fifth as foreign companies have shut down production, running the risk of turning the political crisis in the Middle East into an oil crisis.
Oil prices surged yesterday after Eni of Italy and Repsol YPF of Spain, the largest oil producers in Libya, said they were shutting down output. Traders said two of the four oil ports in the country were also closed, and refineries have also been affected.
In a sign of the deepening crisis, Ali Naimi, Saudi Arabia’s oil minister, said the Opec oil cartel stood ready to boost production to offset any loss from Libya. However, Mr Naimi reiterated that for the time being the oil market was well supplied.
Oil prices pared some gains after Mr Naimi reassured the market, but Brent crude, the global benchmark, continued close to its highest level in two and a half years at $107 a barrel.
“I don’t know if anybody right now knows what is happening in Libya,” said Mr Naimi in Riyadh. “Whatever is happening in Libya, the disruption to oil markets has not happened. When we see a shortage in supply, we will rectify immediately.”
Saudi Arabia retains about 4 million barrels a day of spare production capacity. Mr Naimi stressed that Riyadh had the ability to remedy any shortage of supply.
“We have done this so many times, responding to emerging crises,” Mr Naimi said, in reference to Saudi Arabia’s move to pump more oil during the first Gulf War in 1990-1991; during the oil strike in Venezuela in late 2002; and in 2003 during the US invasion of Iraq.
The International Energy Agency also controls large emergency stocks of oil, which could be released into the market to meet any shortage.– (Financial Times)
