Global stagflation has moved from knocking gently on the door to pounding with a battering ram. Brent touched just south of $120 overnight, the highest level since the summer of 2008, just before the global economy imploded, after reports circulated that the oil facilities of CNPC, the largest Chinese oil producer, were attacked in Libya. "News of the attack will heighten concerns among oil industry executives that the turmoil in Libya may lead to widespread sabotage of oil facilities and that it would take many months or even years to return the country to full production capacity even if a semblance of peace returns. In a speech earlier this week, Seif al-Islam Gaddafi, the son of Colonel Muammer Gaddafi, warned that in the event of a civil war, Libya’s oil wealth would be “burned”. In a terse announcement, CNPC said it was in the process of evacuating its 391 Chinese employees from the country and had already repatriated 24 of them. Contacted by phone, CNPC confirmed the attack but did not provide details, saying that it was still waiting for the latest news out of Libya." Unfortunately, as we first suggested three days ago, it is now only a matter of time before the Libyan madman decides to set his oilfields on fire in recreation of Saddam's parting gift to Kuwait, as retaliation against the world. In the meantime, US GDP has just lost another $300 billion in 12 hours, wiping out the gains all the gains in the last quarter.
Separately, foreign ministry spokesman Ma Zhaoxu acknowledged that some Chinese companies in Libya “had their local camp sites raided by gangsters, and some people got hurt.”
On Wednesday Misurata fell under the control of forces opposed to the Gaddafi regime but it is unclear who was responsible for the attack on the CNPC site.
China’s trade with Libya centres mainly on oil, but the $6.6bn in bilateral trade also includes companies in a wide range of other businesses, thanks in part to China never having imposed sanctions on the Gaddafi regime.
State media say more than 30,000 Chinese citizens were present in Libya at the time of the attack. Many of them are thought to be construction workers involved in infrastructure projects.
One Chinese railway worker delivered a dramatic account of an attack on a company camp via microblog posts on Chinese website Sina. Raiders set fire to equipment and cars and injured Chinese workers in an attack on Monday night, said the blogger known as “Happy Xufeng,” posting pictures of the inferno as well as desperate calls for help.
“We are in great danger,” he wrote on Monday night. “Chinese companies in Libya are in a state of emergency, our projects are being raided and communications are down.” By Wednesday the blogger, an employee of China Railway 11th Bureau, reported that he and his compatriots were being evacuated to safety
Not very surprisingly, in our oh so globalized world, Portuguese 10 Year bonds just hit another all time high as $120 Brent apparently is not very stimulatory...
Elsewhere, the Sensex dropped by over 3%, the most since August 2009, as the world slowly realizes the Koolaid hangover has set it.
And an update from Goldman on the coming oilpocalypse: