Libya war jeopardises Europe oil supplies
As fighting in Libya's civil war raged on Thursday around the key oil town of Ras Lanuf, questions arose about the effect this could have on supplies to Europe, Libya's main customer.
On Wednesday, powerful explosions went off near an oil facility as loyalists of Libyan leader Moamer Gathafi rained artillery shells on rebel positions west of the town.
By midday on Thursday, rebels were beginning to flee the city under heavy rocket fire.
Speaking Wednesday night, rebel national council spokesman Abdelhafez Ghoqa said "the regime has concentrated its bombardments today on oil industry sites in Ras Lanuf. The oil wells have been bombarded, as well as oil installations."
"What worries us since the beginning and what has happened today is the bombardment of oil installations by the Gathafi regime's artillery and warplanes," he added, reiterating rebel calls for the international community to impose a no-fly zone over Libya.
The extent of the damage on Wednesday was unclear, nor was there any way to ascertain what might occur as loyalists appeared to be retaking the town from rebels.
The head of Libya's National Oil Corp., Shukri Ghanem, said the explosion in As-Sidra, just west of Ras Lanuf, caused no damage to oil installations.
"Fortunately, the explosion today was in a small storage supply facility in Sidra... it has not affected the production," Ghanem said, adding, "It was diesel, it's not crude oil."
But Fathi Faraj, a director of Arabian Gulf Oil Co., one of Libya's crude producers, said "Gathafi is showing his true intentions. Either he has the petroleum in his hands, or he starts to bomb it.
On Wednesday, the strongman accused the West of wanting to seize Libya's oil.
"The colonialist countries are hatching a plot to humiliate the Libyan people, reduce them to slavery and control the oil," he said.
What is clear is that oil production has plunged since the revolt to oust Gathafi began on February 15.
On Wednesday, Ghanem said output was down by more than two-thirds from 1.6 million barrels per day (bpd) to just 500,000.
"Of course, the production is down drastically, or it is only half a million a day down from 1.6 million a day," Ghanem, who is both chairman and chief executive of the state-owned firm.
"The foreign workers went back to their countries, the Libyans to their families, and of course oil production went down and oil exports went down," said Ghanem.
"We are concerned that the production goes down in a orderly manner rather than damage the installations... and so far we have succeeded."
Faraj, who also heads the civil committee governing Tobruk, a rebel-held town with a major terminal near the Egyptian border, was far more pessimistic about the output figures.
Referring to Ghanem's claims, he said "crude production is at its lowest level -- to 20 percent" of normal.
Ghanem declined to be drawn on the potential impact of mounting international sanctions on Libya's key oil revenues.
"We will cross that bridge when we'll reach it," he said.
In 2009, Libya produced 1.789 million bpd, fourth in Africa behind Nigeria (2.211 million bpd), Algeria (2.125 million bpd) and Angola (1.948 million bpd), according to the US Energy Information Administration.
Before the uprising, Libya exported most of its oil to Europe.
The largest quantity, 32 percent, goes to Italy. Germany takes another 14 percent, Spain 10 percent and France nine percent.
Other big customers are China (10 percent) and the United States (five percent).
On Wednesday, a JPMorgan report said that, for the moment, European stocks are adequate.
However, it added that, "with around 70-80 percent of Libyan crude exports going to Europe, there is a need to replace around 500-800 thousand barrels a day of light sweet crude."
"It does not take too many days of outage to draw stocks by the 20 million barrels that would take (European buyers) out of the comfort zone."
Faraj said production is at a virtual standstill in eastern Libya, and that in the past three weeks the only oil tankers to arrive in the area were two from China.
"In Tobruk we have one million barrels stored out of a capacity of five million. At the current rate of production it will take at least two weeks before we will be able to export more crude."
World oil prices fell back on Thursday after spiking sharply higher a day earlier, as traders kept a wary eye ahead of US data and planned protests in oil kingpin Saudi Arabia.
New York's main contract, light sweet crude for delivery in April, dropped 32 cents to $104.06 a barrel.
Brent North Sea crude for April shed 51 cents to $115.43.
"Crude oil prices have been under pressure and corrected lower as geopolitical tensions in Libya slightly eased while some further profit taking emerged ahead of the US economic figures," said Sucden Financial analyst Myrto Sokou.
Stepped-up fighting in Libya, including the bombing of key oil infrastructure, sent London prices soaring on Wednesday but higher US crude stockpiles pressed New York prices down slightly.