Half Of Libyan Oil Production, Or 800,000 Barrels, Now Offline

Tyler Durden's picture

Our advice to Italy, which imports 425,000 barrels of oil each day from Tripoli: "Panic." Following yesterday's Force Majeure announcement from Libya which meant that oil production and exports will continue only for a few more days, the FT now reports that over half of Libya's production, or about 800,000 barrels is now offline. As Libya accounts for ~2% of global oil exports, this means that 1% of world oil output has just been removed. And to all those who claim that excess OPEC capacity can be easily substituted, sorry it can't - Libyan crude is far higher in quality than the general muck, meaning it is not a simple apples for apples replacement. From the FT: "Industry executives told the Financial Times that at least half of Libya’s 1.6m barrels a day oil output had been closed down. They cautioned, however, that they could only estimate the total outage since they did not have direct knowledge of production at their competitors’ oilfields." And if Nomura's earlier call is correct that a combined Libya-Algeria oil stoppage will result in the doubling of crude prices (and one can only imagine what happens if Saudi is thrown into the fray), then our January call for "higher" oil may lead to some very tidy profits. In the meantime, we expect the partial Libyan oil closure to reach 100% shortly.

More from FT:

Spain’s Repsol and Germany’s Wintershall, part of the BASF group, have publicly announced that they have shut down production from Libya, estimated to be 350,000 b/d and 100,000 b/d respectively. In addition, traders and industry executives said that production had ceased at certain fields operated by Total of France and Italy’s Eni, equal to a further 300,000-350,000 b/d. The companies confirmed only that there had been some impact on their oil output.
The extent of the impact on oilfields operated by Libya’s national oil company, which accounts for about a quarter of the country’s production, was unclear.

Ms Sen estimated that as much as 1m b/d may have been shut down – more than 60 per cent of Libya’s total production. The rest of the country’s output is “increasingly under threat”, she added.

Traders added that Libya’s national oil company had declared force majeure – a legal clause allowing it to default on contracted deliveries – on contracts to export oil products. In addition, most of the country’s ports remain closed.

Lastly, expectations that OPEC can just step in and fill the void are largely unfounded, not in the least since peak OPEC output is likely vastly exaggerated.

“Without information on the scale and duration of any disruption, Opec cannot accurately gauge how much additional crude to produce. A release stocks by the IEA may meet market needs more closely,” Mr Eagles, former head of oil markets at the IEA, said in a note to clients.

Look for Brent to continue on its path to $120 over the next week, bringing it ever closer to its all time highs just over $140. Make that $140 if the US does, as some speculate, invade the region to bring "peace and stability" to the region.

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tmosley's picture

Yeah, we did such a great job in Iraq.  Libya should be no problem.  Mission accomplished.

Exposer of Internet Shills's picture

**Insert** The obligatory "Silver Bitchez"

the mad hatter's picture

CL, SI, ZR bitchez!


disclosure: that's all i own

jus_lite_reading's picture

Riots now taking place in India over rising food prices. 100k + marching. ORI, where are you?

A Texan's picture

Say hello to $4 gas within the next 2 months, tops.  If all Libyan production goes south, it'll spike up to that level within a couple of weeks.  If this continues for more than a few weeks, it'll get worse, and if there are any other problems with oil production or refining at the same time, say hello to $5 gas...which will just do wonders for the economy.  :>(

samsara's picture

Owwww,  That's gonna hurt.


topcallingtroll's picture

Lighter sweeter (less sulphur) crude can only be cracked by a few types of refiners.  the heavy sour (high sulphur) stuff has to go to refiners like Valero.  It has been a good long term energy play because heavy sour sells at a discount.

Our future is looking very heavy and sour.

Ethics Gradient's picture

I think you'll find the lack of peace and stability is just fine for the bits of the US government that counts - if it means they can ultimately bomb gas centrifuges in Iran with proper justification.

DOT's picture

Game on !  Who will win the bid on the Floating Oil Fleet ?

EEU ? China ? Morgan Stanley ?


MarketTruth's picture

Oh no Luigi, what shall we put in the Ferrari and Lamborghini?!?!? Maybe the Fiat Panda will be the new Ferrari 176?

luigi's picture

I can arrange a wonderfully streamlined wood-gas conversion kit... and a tender for the wood as well, it comes with full alloy wheels and spoiler...

camaro68ss's picture

Going long on TP for when the SHTF.

Rodent Freikorps's picture

Mine is an RS/SS convertible with full instrument package. I'm ready for the EMP.

Jeff Lebowski's picture

I like your style.  I'll be in the orange 68 formula 400.  We can go fuck shit up!

Oh regional Indian's picture

Interesting. never thought it would jump to mainland europe this way. I thought it will be the restive, segregated immigrant sections of society, a la France a few years ago.
This is diabolical.
All eyes on the Vatican. And if you think trouble at the Vatican cannot move markets, think again.


Caviar Emptor's picture

Look for Obama to start jawboning about releasing crude from the SPR. 

That can only have a temporary effect and remember, still needs to be refined before it hits the market. 

sushi's picture

They are already planning to remove stocks from one of the SPR locations due to the need to correct some problems with the storage structure. CONUS is oversupplied at present. I expect the major impact will be in euroland but am puzzled at what is bouying the euro up. Greece about to bail out Italy?

Caviar Emptor's picture

I think they're keeping it up because all algos have been correlated to EUR/USD all year long as a 'risk on' signal. If Euro tanks, then market will plummet

Arthor Bearing's picture

Short Hummer- sound investment advice or dissapointing end of your date night?

johnQpublic's picture

long hummer if you could control yourself better

lieutenantjohnchard's picture

wonder if tomorrow's release of crude inventories at cushing will matter?

jus_lite_reading's picture

A friend of mine in Germany said he is withdrawing all his money from the bank today and buying gold. Coincidence?

johnQpublic's picture

when oil was 147 a barrel, there was alot less traffic on the roads.


at 220 a barrel there would be just about none save for the few bmw's and mercedes

i think demand destruction will therefore halt the price around 175 or so tops

(do not) mark my words

luigi's picture

Italy imports more or less 23% of its needed petrol from Lybia, it means we lack at the moment some 12% of what's needed and there should be still some reserves considering that due to economic recession alone we are on the path of complying with Kyoto's objectives...

So good tho have a wooden stove...

Boxed Merlot's picture

Seeking Alpha 11:42 AM

Ireland relies on Libyan crude for 23.3% of its needs, besting even Italy (22%). No crisis yet as the Irish have 101 days of stockpiles, but it's another issue for Fine Gael to flag before elections on Friday.

So good tho have a wooden stove...

luigi's picture

And some wood around the property, not to forget!

Rodent Freikorps's picture

Looks like France will have the last laugh.

PicassoInActions's picture

Bring BUsh back, this one supports riots.

falak pema's picture

Khadaffi has paid 10000 Euros per mercenary, coming from Benin, Chad, Macedonia, to come kill the insurgents. That's how far he is committed to keeping his gold mine his own. This is costing him an arm and a leg. How long can he use this type of expenditure? 10000 armed men at this price per month plus all the arms and logisitics around it. Mind boggling.

But let's face it, Khadaffi owns large  chunks of Italy's economy. Its an amazing puzzle as the oil majors, the Saudis  and Italian politicians caution against bringing him down. Lets see what the US administration and the EU as a whole will have to say.

Caviar Emptor's picture

Libya oh Libya that encyclopidia


Richard Head's picture

Brent to the moon, while the US does everything it can to keep WTI below $100.  We can't have $100 oil leading the 6:00 news now, can we?

Sizzurp's picture

Berlusconi is going to be so distraught.  Oh well, nothing a few more hookers won't help him forget.

Can the EU survive another severe recession without Italy, Spain, Portugal, Greece, and Ireland going completely belly up.  How long before the Germans say F this and walk away.  What is a Euro really worth? 

Harmonious_Dissonance's picture
Mick Jagger and Muammar Qaddafi: Separated at Birth?


falak pema's picture

Sizzurp : What you say about EU applies to USA also. But it's true that EU has nobody like Benocide who can print away in mode QE, protected by 'exorbitant privilege'. So it's not a situation that helps the West as a whole. If you're a currency speculator, which I'm not, I understand your concern. It's not an easy choice which horse to back. 'You pays your money n you takes your choice'...then you hope and pray...like Khaddafi. Brave new world.


falak pema's picture

One interesting aspect of the Libyan situation is that the eastern part of libya, where most of the oil production lies and flows through, is now controlled by tribes hostile to Khaddafi. How he will resolve this regional, de facto partition will also be a factor to monitor.

MrTrader's picture

PANIC because of 425.000 barrels? Hum, hum, hum. Not at all. Putin and Medvedev are already in discussions to provide "extra liquidity".

CrashisOptimistic's picture

Russia has no spare capacity.  If you want them to pump more, you'd have to drill (in addition to the 6,000 wells PER YEAR they drill now) another 3-4000 wells PER YEAR.

People, get calibrated on how it works.  You don't drill a well and have it produce forever.  IT GOES DRY AND DIES.  You have to drill more and more and more to overcome the old wells dying.  This is not a theory.  This happens every day.  If it did not happen, there would be no Plug and Abandon phrase in the oil lexicon.

If Libya smashed their own infrastructure, say, a 3-4 year repair job, that is 3-4 years of dying wells all over the world.  Bringing Libya back 4 yrs from now has to overcome loss of all those dying wells.  When Libya came back, it might not yield an increase over 2009's production level globally.


savagegoose's picture

america still has plenty in the ground, they are just waiting till everyone else uses their oil reserves 1st.

falak pema's picture

I'm sure they'll wait until hell freezes over and the mid-east is totally dry.

Pure Evil's picture

So, do the Italians know how to stick their heads between their legs and kiss their asses goodbye?