Bulk Of Libyan Oil Infrastructure Now In Rebel Hands As Paralyzed Libyan Oil Trade Threatens European Economies

Tyler Durden's picture

In David Greely's note which we noted earlier, in addition to debunking speculation that OPEC has much if any spare excess capacity, confirming Jim Rogers' point from a week earlier, he observes that more than half of the country's oil infrastructure may already be in the hands of rebels. Whether this will merely reinforce Gaddafi's resolve to let everything burn in his wake is still unknown - repeated rumors that he is seeking to hand over power peacefully have so far been squashed, as the offensive against rebels accelerates. In the meantime Reuters reports that European oil imports are about to get very complicated, making life for Italy, which is most reliant on Libyan oil, quite complicated: "Libyan oil trade has been paralysed as banks decline to clear payments in dollars due to U.S. sanctions, trading sources told Reuters on Tuesday. The move follows a decision by major U.S. oil firms to halt trade with Libya and will complicate deals for European firms to buy Libyan oil. Around half of Libya's oil output, or more than 1 percent of global supply, has already been choked off by lethal clashes between rebels and forces loyal to Libyan leader Muammar Gaddafi. . Oil prices hit their highest levels since September 2008 on Monday." We anticipate that NATO forces with GCC backing, will find a way to institute a no fly zone to prevent an all out "Saddam" response which could see all the oil holdings in rebel hands be destroyed in retribution by the Gaddafi regime, which we are skeptical will result in dropping oil prices.

From Goldman's Greely:

Based on company reports, we estimate that close to 1 million b/d of the total Libyan production capacity of around 1.6 million b/d is currently either shut-in or cannot be exported. Assuming that all oil fields and export terminals controlled by the opposition are currently offline, the disruptions could be larger than our current estimates (Exhibit 2). However, given the unstable situation in the country, it is sometimes very difficult to determine who actually controls the asset. We have seen conflicting reports in which both the government and the opposing forces claim control over the same ports and fields.

The market has also become increasingly concerned about further contagion in the region. While we continue to believe that it is unlikely that the turmoil will spread to the richer and politically more stable GCC countries, there are a number of economies with similar traits to Libya that could be susceptible to further contagion, namely Algeria, Syria and in the extreme maybe even Iran. The question therefore arises how much spare capacity is left to absorb potential supply disruptions in other countries?

And more from Reuters on the complete halt in oil trading which threatens to send European gasoline prices to all time records:

Banks don't want to finance the system in Libya, so for the moment no one is getting money for oil. There are big problems for payments," said a senior trader with a European oil company.

Sources at or close to major European buyers of Libyan crude, including Italy's Eni and Saras, said the decision by banks to stop export financing of Libyan crude had virtually brought all transactions to a halt.

"It's not a matter of choice, there is an embargo on U.S. dollars coming in and out of Libya," said a trader with one of the firms, referring to banks' resistance to clear payments in the U.S. currency.

"All U.S. dollar transactions are being blocked," the trader said, adding it was not clear at this stage if payments were possible in other currencies.

 Western countries, the European Union and United Nations have imposed sanctions on Libya and frozen government assets in response to forces loyal to Gaddafi firing on protesters.

"Sometimes it is easier not to trade at all than to trade with many caveats," said an oil trader working for a major international bank, adding longer-term EU law interpretations could reopen some paths for trade.

"If you can prove that money from oil purchased goes back to accounts not controlled by Gadaffi and family, perhaps you could argue that you are buying oil for humanitarian purposes and that the money would flow back into the country," he said.


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NewThor's picture

Operation Nobel Peace Prize BITCHEZ!

Michael's picture

Time to mute CNBC and listen to Alex Jones Internet radio. It's a hoot.


Oh regional Indian's picture

Oil is the anti-christ.

Think about it.

The bringer of light.

I'm serious.



Oh regional Indian's picture

Seriously. What is driviing the world mad AND aflame? What is makign men do things to one another that makes no sense at all. What has driven this killing power to where it is today. What makes flight possible? Unicorns and methane farts?

What is the root of all evil right now? Money or Oil? I'd say oil.

The sudden dis-appearence of what one thing will return this whole "uncivilization" to dust and rust? One cycle of seasons without and it's all gone.

I'll say it again, for effect, and I'm not a religious nut. This is much deeper.

Oil is the anti-christ.

We just never thought of it possibly being non-human.

Worthy of consideration. 


iDealMeat's picture

Sooooo...  When we burn up all the "anti-christ" and feel good about it.. 

Earth should be a pretty peaceful place.. Everyone walking around all the temperate areas and all..



LudwigVon's picture

Well when the deepest hole in the earth, drilled in Rusia, was completed, engineers put a microphone at the bottom and what was recorded sounded like hell. So perhaps it is possible to burn up all of the anti-christ and the world will be a temperate peaceful place. Perhaps that is all in the design, timing wise. I say we should give it a shot, because personally I love the sound of twin 502 (8.2L) big blocks, turbocharged with the water pourin out of the exhaust on a modded cigarette boat and I am willing to pay $8/gal USD easy to hear that!!!  

ElvisDog's picture

I think you're totally wrong, ORI. Oil is the magic elixir, the thing that makes it possible to support 7 billion people on Earth. The reason people fight over it is that it is the best energy source we have. It is relatively easy to extract from the earth (more true in yesteryear). It has a high energy density. It is liquid at room temperature, which means it's easy to store and can be transported in pipelines.

If you really want the fun to begin, just wave your magic pixie dust and make oil disappear.

NewThor's picture

Ben Bernanke is the 3rd Anti-Christ, duh.

oba MABUS h = The Bearded Star

The one who causes a global period of lawlessness

If you read your Book of Revelation and the 1000 quatrains of Nostradamus,

it's pretty clear. 

Ben Bernanke is the evil one.

And Obama will only last 3 1/2 years as president.

Quintus's picture

And yet, crude prices are down.  Funny how Oil prices, like Gold and Silver, mostly fall during US trading hours and mostly rise when Wall St. is closed.

malikai's picture

Indeed. Hopium in the world of oil supply seems to never have been bigger. I'm standing by, watching in awe, and waiting to pounce.

vote_libertarian_party's picture

"threatens"...as in really bullish for stocks???  I need a new dictionary because this oil threat apparently is really bullish for stocks.


Oh...wait...I forgot, Bizarro World.

Spalding_Smailes's picture

apparently is really bullish for stocks.

No, but this is ....


WASHINGTON, D.C. – March 7, 2011 – The Association of American Railroads (AAR) today reported that monthly carloads in February 2011 increased 4.2 percent compared with the same month last year, for a total of 1,135,396 carloads. According to AAR’s monthly Rail Time Indicators report, intermodal traffic in February increased 10.3 percent for a total of 881,830 trailers and containers compared with February 2010.

February 2011 marks the twelfth straight month for carload and the fifteenth straight month for intermodal traffic increases on a year-over-year basis, showing the continued gradual upward trend in rail traffic. On a seasonally adjusted basis, however, carloads were down 3 percent and intermodal up 0.1 percent over January 2011.

As of March 1, 2011, 306,316 freight cars, or 20.2 percent of the fleet, were in storage. That is a decrease of 12,457 cars from February 1, 2011.


Ted Celeste's picture

Thanks for changing your avatar, Spalding.  You've really hit a homerun in terms of depicting your simplistic view of the world.  Now it's in illustrated form for all to see.

Spalding_Smailes's picture

Thanks , anytime you want to talk about treasuries are not money or money supply velocity, I'm all ears ....


What about the simplistic train cargo bitch slap for all the USA doomers ... Not hauling pomo, its goods driving a 14 trillion dollar economy.



alien-IQ's picture

yes..they are busy shipping unsold merchandise to landfills and storage warehouses...really bullish stuff there...keep up the "good work" and don't forget to turn on CNBC for your daily dose of optimistic truthiness.

LongSoupLine's picture

This can't be true.  I didn't see it on CNBC.


Oh...wait, they can't interrupt "BUY BANKS!" day, as the telepromptor whores mention the words "BAC" and "higher dividends" every 30 seconds.



slewie the pi-rat's picture

LongSoopLine.  this whole page is outrageous. 

i do appreciate this article pointing out that the squid is in charge,  fuk alexander haig!  and, if it weren't for conflicting reports about who the fuk is in charge of what the fuk in Lybia, we would be able to focus on what we're s'posed to be assessing:  the price of tea in china...

mr soopline:  turn off the fuking TV, fire up the bong, and go for a walk, ok?

Sutton's picture

April crude down 112, but April/May spread up 38 ticks even with the roll(massive) looming.

TradingJoe's picture

Agree, they are buying oil on this weakness and options are going ape as well, I think the roll won't do much given the "fundamentals" :))! One SA "news" and it's to Mars and back!

SgtShaftoe's picture

That's nice data and a good map, Thanks!

Larry Darrell's picture

"Libyan oil trade has been paralysed as banks decline to clear payments in dollars due to U.S. sanctions"


"All U.S. dollar transactions are being blocked," the trader said, adding it was not clear at this stage if payments were possible in other currencies."


I'm sure this kind of stuff will help weaken China's case for getting rid of the dollar a reserve currency.


Bringin It's picture

No it won't.  It will further motivate them to expand the scope of RMB transactions.  They are working on this. 

alien-IQ's picture

definitely bullish...definitely definitely bullish.

JW n FL's picture

Hurry send the Troops in... the Oil is not flowing.. the free people are in control.. we cant have that!

SgtShaftoe's picture

This will simply accellerate the solutions to "peak oil".  If anyone still believes in peak oil any more, read this:


JW n FL's picture

it is NOT! Peak Oil in the sense that we are out of Oil.. Oil is every where!

it is Peak Oil in the sense that we are running our of sweet lite crude..

We are running out of $50 a barrel stuff...

What we have left.. and lots of it.. is the $300 a barrel stuff..

watch this and learn something, so that you can see the world for what it really is.. not some left or right sound bite that is designed to keep you in a mental cage.


JW n FL's picture

and if you think that you are not being handled.. by your goobermint...


in case you think it is just some un-american jibber jabber that you are suffering here in the boogieman zone.

SgtShaftoe's picture

JW n FL,

I understand very well the peak oil argument.  I can agree with the first, short-term part, rising prices.  Most peak oil people think though that we will see an end to economic growth.  I don't agree with that.  I'm presenting the Julian Simon argument:

"More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. Higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions…In a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred."




TeamAmerica's picture

"In a free society, solutions are eventually found"

Another way to put this would be "alternatives are eventually found" or "demand recedes as buyers surrender".   Higher prices do not mean new sources of cheap oil will be found (believing that is nothing but a statement of faith).    So if a day comes when everyone is driving electric cars, sure...maybe the price of oil will eventually be "lower than before the increased scarcity occurred".

disabledvet's picture

and of course the only thing scarier than the "Saddam option" is the..."Saddam removal option."  Who get's the oil then?  This will be an interesting call by noneother than the President himself--and no one else for that matter.  "To NATO or not to NATO?"  That is the question.  Everyone says "they don't want the Americans"--but as the Palestinians say of us "they are an honest broker."   Sometimes the "best imperial friend" is one "far, far away."

JW n FL's picture

in Libiya they were chanting for Bush to come save them.. I guess they didnt know about Obama being elected.

gwar5's picture

.....and that's why Europe is willing to take the lead in Libya. At least they can't bash the USA for defending their own milkshake. 

Mercury's picture

In the meantime Reuters reports that European oil imports are about to get very complicated, making life for Italy, which is most reliant on Libyan oil, quite complicated...

Personally I'm tired of it but you can at least make the case that the U.S. should be actively supporting pluralistic governance movements in dictatorship countries.

But sending in a carrier strike group to keep gasoline cheap for Italians?  I don't think so.

Keep an eye on Berlusconi.  He may do something rash here in an attempt to rebuild his personal political clout.  http://www.youtube.com/watch?v=KkDp-6t-keA

sunnydays's picture

What would stop other countries from stopping taking the dollar for oil?  the dollar only has it strength still due to being used as the trading currency for oil. 


Also notice it is the banks not accepting it.  They are the ones then behind blocking the dollar.  

Reptil's picture

No need to panic: Queen Beatrix of the Netherlands has arrived in Oman, and is supposed to singlehandedly dig some new wells, and douse some pesky democratic flames. whooopeeeee



SilverFiend's picture

"Libyan oil trade has been paralysed as banks decline to clear payments in dollars due to U.S. sanctions, trading sources told Reuters on Tuesday.

Shouldn't we be begging people to continue to use the dollar?


Sokhmate's picture

Mark my word: Libya will be devided into 2 or 3 countries. One new one will be in the east, another where there is major oil underneath, within the new drawn borders. There is probably already a constitution and a president in place for each, to be unveiled in due time.

Bartanist's picture

ROFLMAO.... so isn't it time for the powers that be to fund NGEs to create a furor over GASP conflict oil, the way that they did with conflict diamonds in Sierra Leone and with conflict minerals in the DRC.

What a pile of hypocritical crap!