ATTACKS ESCALATE:LIBYA'S MAIN oil terminal was in flames last night after Muammar Gadafy's air force bombed the complex, in an escalation that pushed the cost of the benchmark Brent above $115 a barrel.
The attack on the Es Sider terminal, in the country’s rebel-controlled eastern region, was the first against a critical oil facility since unrest in the North African nation erupted last month.
Rebels retaliated with rockets as a fireball exploded from four of the oil tanks and the sky above the terminal filled with black smoke.
Libyan state television blamed the explosion on rebels, who it alleged were supported by militants from the al-Qaeda terrorist network.
The fire was broadcast live on Arab television, prompting another buying spree in the oil market. Saudi Arabia, leader of the Opec cartel, has increased its own production to offset diminished supply from Libya.
According to the International Energy Agency, Libyan oil production has fallen to about 500,000 barrels a day, down from a prevailing level of around 1.58 million barrels before the crisis. Italy, Germany, France and Spain are among the biggest importers of Libyan crude.
“With the violence escalating, it was a question of time when oil facilities would be drawn into the fighting,” said Samuel Ciszuk, senior Middle East energy analyst at IHS Global Insight.
Brent crude, the global benchmark, surged to a session high of $116.18 a barrel, near its highest level in 2½ years. It later fell back to $115.54 a barrel.
“It is very concerning that there is damage to the oil facilities in Libya,” said Lawrence Eagles, head of oil research at JPMorgan in New York. “The bigger picture does not change however: oil supplies have been disrupted and will remain disrupted for a long period.”
Meanwhile, European and Chinese companies continue to buy oil from Libya, benefiting the regime with hundreds of millions of dollars even as western powers impose financial sanctions aimed at forcing Col Gadafy from power.
OMV, the Austrian-based oil company, confirmed yesterday that it was buying oil from Libya and planned to continue to do so in the near future.
The company said it was in compliance with European Union and UN sanctions, which target some Libyan individuals but not entities controlled by Col Gadafy, such as the National Oil Company or the country’s central bank.
Unipec, the trading arm of Chinese-based oil group Sinopec, also sent a tanker to a terminal in Libya yesterday in an attempt to purchase two million barrels of oil, worth more than $230 million at current prices.
Since the issue was first reported at the weekend, many European companies have stopped dealing with Libya, in part because banks refuse to finance deals. Washington has imposed a stricter sanctions regime than the EU and UN.
US treasury officials say that institutions of American origin cannot make payments to groups subject to Washington’s sanctions, such as the Libyan central bank, but can make deposits into a blocked interest-bearing account to be refunded to Libyans later.
Wolfgang Ruttenstorfer, OMV chief executive, said his company had “long-term agreements for supply” with Tripoli. “We have still bought Libyan crude oil to a certain extent, to a limited extent,” he said. “We will also in the future keep this to a minimum.”
Mr Ruttenstorfer said that OMV did not transfer money to Col Gadafy’s clan, saying: “Our business partner was always the NOC, the Libyan state oil company. That is still the case now.”
The NOC is under the control of Col Gadafy’s allies in Tripoli, however.
Col Gadafy’s forces, which retreated at the beginning of the conflict and lost a key town in the west of the country near Tripoli, the capital, have struck back over the past week with a wave of deadly air strikes and artillery fire.
In the east of the country, fighting continued around the town of Ben Jawwad and Ras Lanuf, site of another key oil installation.
– (Copyright The Financial Times Limited 2011)