OGJ Oil Diplomacy Editor
LOS ANGELES, Feb. 24 -- Due to the continued violence sweeping the country, Libya’s oil production has decreased by 75% to around 400,000 b/d from the normal 1.6 million b/d, according to Paolo Scaroni, Eni SPA chief executive officer.
The impact of Libya's civil unrest has resulted in “1.2 million bbl less” oil on the market, said Scaroni. “That's not a lot, but it's something,” he said, underlining the country’s “sense of general insecurity” which he said “can be a trigger that sets off speculation” on prices.
Crude prices have jumped 20% in the week since the Libyan people's uprising against the regime of Moammar Gadhafi escalated and turned violent. Investors around the globe worry that other Middle Eastern producers could be engulfed by similar chaos.
That view was underlined by oil analysts in Beijing who said that unrest across the Middle East is likely to prompt Chinese authorities to increase their purchases of oil in order to fill reserves, a move that would put further pressure on global supplies—and prices—of crude.
"Recent events made them very nervous and they believe the oil price may be on an upward trend, so better to buy sooner rather than later," said K.F. Yan, director of IHS CERA in Beijing. "With or without events in the Middle East, China needs to refill the tanks after depleting supplies at the end of 2010."
Yan’s remarks coincided with confirmation by China National Petroleum Corp. (CNPC), China's largest oil producer, that its facilities in Libya recently came under attack, marking the first confirmation of violence against oil producers in the country.
Chinese media described a raid on oil facilities in Misurata, Libya's third-largest city, saying it targeted CNPC unit Great Wall Drill Engineering Co. and caused "tens of millions" of renminbi in damage. It said that cars were stolen and employees' personal belongings were looted.
In a company newspaper, CNPC said some of its project camps and operating sites were attacked but the Chinese firm did not provide further details of the damage. CNPC confirmed that it has evacuated 47 of its 391 Chinese employees in Libya due to the political turmoil.
According to one analyst, news of the attack on CNPC will only heighten concerns among oil industry executives that the civil unrest in Libya could lead to widespread sabotage of oil facilities, a point underlined by Seif al-Islam Gaddafi, the son of leader Moammar Gadhafi, who warned that in the event of a civil war, Libya's oil wealth would be “burned.”
Contact Eric Watkins at email@example.com.
Eni: Libya's violence could 'trigger' increased price speculation