OGJ Oil Diplomacy Editor
LOS ANGELES, Mar. 8 -- Oil prices fell today despite concerns among analysts and traders over the potential damage to Libya’s oil infrastructure caused by continuing air and ground attacks by forces loyal to the country’s leader Moammar Gadhafi.
Brent crude futures for April delivery were down $1.88 at $113.16/bbl, having fallen as low as $112.13/bbl, while US crude futures for April delivery were 70¢ lower at $104.74/bbl, having earlier posted a low of $103.33/bbl.
However, Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said “uncertainty” was the watchword in the market as traders awaited news that could send prices rising or falling once again.
“The market is now waiting for the next piece of news to unfold,” he said, adding, “A turn for the worse for the market would be oil infrastructure being hit as a result of the fighting.”
Tchilinguirian said, “The demise of the current regime or a more forceful statement from OPEC followed by an increase in production would be significant too.”
The analyst’s remarks came as troops loyal to Gadhafi continued air strikes against the rebel-held oil town of Ras Lanuf in a counter-offensive aimed at stopping the opposition fighters advancing westward on the nation’s capital, Tripoli.
At least four air attacks by Gadhafi loyalists on Ras Lanuf were reported in dispatches, with one of them hitting apartments on the eastern edge of the town. But no reports emerged of any damage to the oil facilities near the town.
Ras Lanuf is one of Libya’s main export terminals, normally handling 200,000 b/d of oil, but the facility had been forced to close as the popular uprising turned into armed conflict. Control of Ras Lanuf is said to have changed hands at least twice since the crisis began.
Uncertainty continued to prevail over Libya’s oil production figures, but one analyst said the fighting has brought all exports to a halt, with knock-on effects “most likely” for the nation’s pipeline system and oil fields.
"Fighting in and around several of Libya's most important oil ports and refinery hubs over the past 4 days…[has] made virtually all crude export loading impossible,” said Samuel Cizsuk, an oil analyst with IHS Global Insight.
Cizsuk said the fighting also has “most likely forced a shutdown of the majority of pipelines transporting crude from the inland oil fields to the storage and export terminals.”
Despite the shutdown of Libya’s exports, officials from a variety of governments and international organizations gave assurances over the amount of oil available to the market for the foreseeable future.
"It's important to recognize that the major producers of oil and the major developed economies do have substantial reserves, resources available that they could mobilize if necessary to respond to any supply disruption," said US Sec. of the Treasury Timothy Geithner after talks with German Finance Minister Wolfgang Schaeuble.
Geithner’s view was reinforced by Kuwait's Oil Minister Sheikh Ahmad Al-Abdullah Al-Sabah who said the Organization of Petroleum Exporting Countries was considering a boost in production to ease anxieties over a supply disruption in Libya as well as the potential for other disruptions if unrest in the region spreads.
"We are in consultations about a potential output increase," Al-Sabah told reporters, while Iran, which holds OPEC's rotating presidency, said there was no need for an output boost as consumer worries over supply were mostly “psychological.”
Demands for action
Meanwhile, demands intensified for international action against Libya, with the head of the Organization of the Islamic Conference (OIC) on Mar. 8 calling on the United Nations to enforce a no-fly zone over the country.
“We join our voice to the voices asking for a no-fly zone in Libya, and we call on the Security Council to do its duty in this regard,” Sec.-Gen. Ekmeleddin Ihsanoglu told an emergency meeting of the OIC in Saudi Arabia.
The OIC call followed a strongly worded statement by the six Gulf Arab states on Monday which expressed their support for a no-fly zone.
"The Gulf Cooperation Council demands that the UN Security Council take all necessary measures to protect civilians, including enforcing a no-fly zone over Libya," the six-nation bloc said in a statement.
The UAE’s Foreign Minister Sheikh Abdullah bin Zayed Al-Nahayan said the Gulf monarchies had reached their decision after Libyan authorities “totally refused to allow aid” to reach civilians, adding that “those responsible should be brought to justice.”
Ivo Dalder, the US ambassador to the North Atlantic Treaty Organization, earlier said the alliance could impose such a measure by the end of the week, although he added that the US would also seek a UN Security Council resolution.
Daalder also said NATO would meanwhile use its fleet of airborne warning and control system (AWACS) aircraft to step up surveillance of air, ground and sea movements in and near Libya from 10 hr/day to 24 hr/day.
NATO military planners would finish work on possibilities for a no-fly zone over the next day or so, ahead of a gathering of the alliance’s defense ministers on Mar. 10, Dalder said.
“We could be in a position to make a decision,” he said of the meeting. “I have no idea whether we, in fact, would make a decision.”
Contact Eric Watkins at firstname.lastname@example.org.
Libya: Prices retreat as assurances override concerns over supplies