Violent clashes in Libya force up oil prices, close down production

22 February 2011 16:55  [Source: ICIS news]

LONDON (ICIS)--Violent clashes in Libya caused by continuing political unrest on Tuesday forced more producers to shut down and pushed up the cost of oil, naphtha and aromatics as concerns over supply disruptions spread across the market.

Tens of thousands of people have held protests across Libya, including in its capital Tripoli and the country's second-largest city, Benghazi, in efforts to force leader Colonel Muammar Gaddafi to step down from power and reform his government, following uprisings in Tunisia and Egypt.

Reports have said that fighting between protestors and supporters of Gaddafi have left hundreds of people dead and injured.

As anti-government unrest in the country intensified, Brent crude futures rose by more than $2/bbl on the previous close to levels last seen in early September 2008, while NYMEX light sweet crude futures climbed to a price range not seen since October 2008.

At 08:03 hours GMT, April Brent on London’s ICE futures was trading at $107.80/bbl, up by $2.06/bbl from the previous day’s close, after earlier hitting a session high at $108.57/bbl.

Meanwhile, naphtha and aromatics prices in Asia surged as global crude futures continued to spike on concerns of supply disruption amid the ongoing political unrest in Libya.

At 09:26 GMT, light sweet crude for March delivery was trading at $94.02/bbl, up $7.82/bbl from Friday's close since the US market was closed for a holiday on Monday.

The rising Brent crude oil prices drove the weekly average price of European naphtha to $880/tonne on Tuesday morning, its highest level since mid-September 2008.

The effects of the soaring price of crude oil overrode the influence of a weaker crack spread to take the naphtha cargo range to $904-912/tonne CIF (cost, insurance and freight) NWE (northwest Europe).

Shipping activities in Libya also remained uncertain as telecommunications, the only means of communication with vessels and shipping agents, were crippled.

A source from shipowner General National Maritime Transport Co (GNMTC) said the group had not yet evacuated its staff, but it had contingency plans in place.

BASF’s energy unit, Wintershall, was evacuating international staff from Libya and shutting down its oil production.

The company, which produces around 6% of Libya’s daily 1.58m bbl/day output, according to data from the International Energy Agency (IEA), currently operates eight onshore oil fields some 1,000km southeast of Tripoli or 350km southwest of Benghazi.

In addition, Spanish oil company Repsol-YPF has also suspended its production in Libya.

State-owned oil company National Oil Corp (NOC) of Libya stopped methanol production at its plant at Marsa El Brega due to safety fears, a source said, adding that methanol was being put into storage for security.

In a speech on Tuesday evening, Gaddafi said he would not resign and that he would stay in Libya. He also called for his supporters to take to the streets and defend against any opposition he faced.

Additional reporting by Lester Teo, Rebecca Clarke, Sarah Trinder Pearl Bantillo and Jo Pitches

($1 = €0.74)

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