• 1 hour LNG Glut To Continue Into 2020s, IEA Says
  • 3 hours Oil Nears $52 With Record OPEC Deal Compliance
  • 7 hours Saudi Aramco CEO Affirms IPO On Track For H2 2018
  • 9 hours Canadia Ltd. Returns To Sudan For First Time Since Oil Price Crash
  • 10 hours Syrian Rebel Group Takes Over Oil Field From IS
  • 3 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 3 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 3 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 3 days Schlumberger Warns Of Moderating Investment In North America
  • 3 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 3 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 3 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 3 days New Video Game Targets Oil Infrastructure
  • 3 days Shell Restarts Bonny Light Exports
  • 3 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 4 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 4 days British Utility Companies Brace For Major Reforms
  • 4 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 4 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 4 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 4 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 4 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 4 days Rosneft Signs $400M Deal With Kurdistan
  • 4 days Kinder Morgan Warns About Trans Mountain Delays
  • 5 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 5 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 5 days Russia, Saudis Team Up To Boost Fracking Tech
  • 5 days Conflicting News Spurs Doubt On Aramco IPO
  • 5 days Exxon Starts Production At New Refinery In Texas
  • 5 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 6 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 6 days China To Take 5% Of Rosneft’s Output In New Deal
  • 6 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 6 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 6 days VW Fails To Secure Critical Commodity For EVs
  • 6 days Enbridge Pipeline Expansion Finally Approved
  • 6 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 6 days OPEC Oil Deal Compliance Falls To 86%
  • 7 days U.S. Oil Production To Increase in November As Rig Count Falls

Breaking News:

LNG Glut To Continue Into 2020s, IEA Says

Alt Text

Trump’s Iran Decision Haunts Big Oil

Donald Trump’s Iran decision has…

Alt Text

Rising OPEC Production Weighs On Oil Prices

After seeing a slight drop…

Update on Libyan Oil Production

Update on Libyan Oil Production

The trajectory of Libyan oil production remains concerning. Estimates of current shut in production vary from a low of 500,000 barrels/day (b/d) to over 1 million, from a total production of 1.6 million barrels/day (mmb/d).

Company withdrawal of expatriate production workers appears to be a major contributing cause of the production decline, not damage to producing fields, although other factors are in play. Though Libya is a small producer, its oil is highly prized in the Mediterranean basin by Italian, French, and other regional buyers, as well as in northwest Europe for use by heavy, sour-based refiners as a blending crude.

Libyan export terminals appear still to be able to accept export cargoes, but with fighting around Ras Lanuf—home to the largest refinery and the country’s largest oil export facility—tanker owners are likely to be hesitant to commit tankers to begin loading in the face of potential harm to ships and crews. In addition, there are reports of buyers being unable to decide who to pay, and some may be having trouble obtaining insurance coverage.

Foreign buyers of Libyan oil, primarily refiners, as well as spot and forward traders, appear to have bid up global market prices of the higher-quality sweet crudes, similar to those produced by international oil companies (IOCs) in Libya, as they try to cover demand for future refining activities or purely to speculate by betting on continuation, if not spreading, of current market disruption to other suppliers in the Arabian gulf.

Refiners’ efforts to cover their crude needs from alternative suppliers reflect the shortage of Libyan crude oil, which is attractive for its higher production of gasoline and diesel for the major consuming markets.

These alternative, and generally similar, sweet crudes are from Algeria and Nigeria in the Atlantic Basin and Azerbaijan in the Caspian. The increased demand for these crudes comes at a time when parts of Nigerian production are already shut in. The increased demand reflects requirements from European and probably Asian buyers. Nigerian crude is purchased by select U.S. refiners, who are competing to maintain supply of the higher-quality crude oils prized at this time of the year.

Not surprisingly, sweet crude prices in Singapore are also up, reflecting in part China’s refinery requirements for higher-quality sweet crude. Chinese companies are estimated to import about 11 percent of Libyan production—or close to 200,000 b/d.

Chinese refineries were historically dependent on domestic sweet crude to charge their refineries. It would not be surprising if Chinese traders are contributing to the price run-up as they seek to cover forward requirements with purchases of alternative European and African sweet crudes.

Seasonal factors contribute substantially to the price run-up, as refiners have begun producing gasoline and diesel for the summer driving season in the Northern Hemisphere following normal seasonal maintenance.

For those refiners lacking deep conversion capacity, Libyan and related sweet crudes are used to blend with less attractive crude oil to reduce sulfur content and to increase production of higher-end transportation fuels for the summer driving season.

All of these factors contribute to the general increase in global oil prices, particularly for the higher-valued crude oil.

U.S. officials have indicated that the United States may draw from the Strategic Petroleum Reserve to address current high crude oil prices. Saudi Arabia also indicated it may increase production to meet the shortage.

Unfortunately, current high prices are not related to the current shortage of global crude oil supplies. Rather, some market participants appear to believe that the political trouble in Libya may increase, as well as spread to the other major producers with excess capacity, leading to a major physical shortage in global crude supplies and a further increase in prices—and that any crude that may come to the market as a result of increased production, or from the U.S. Strategic Petroleum Reserve, may not be of the appropriate quality or sufficient quantity to meet current demand.




Back to homepage


Leave a comment
  • Anonymous on March 16 2011 said:
    Excellent article, author. This is the kind of information that we need, and not hypocritical waffle about freedom and democrasy of the kind we get from CNN. As you pointed out, the departure of production workers was unfavorable for production, and I hope that they can be convinced to come back - in fact, come back in the planes that removed them. In case the colonel is listening, a general amnesty - based on don't ask don't tell - might be very useful, and some effort put into making Libya the prosperous country that it is capable of becoming.
  • Anonymous on March 16 2011 said:
    Fred, I agree completely. Well said! And well written, the author!
  • Anonymous on March 18 2011 said:
    With all the media play being given to the nuclear disaster in Japan, I am worried that another environmental disaster may occur in the middle east. I am concerned that fanatics of one sect or tribe or group or another, will start blowing up Libyan oil wells. Remember when Saddam's forces rigged oil wells in Kuwait with explosives in 1991? I realize that oil is not radioactive. Nonetheless I was heartbroken at all the billions of gallons of oil that was wastefully burned in the atmosphere for no good purpose. I am concerned the same thing will happen again in Libya.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News