Saudis plug Libyan oil gap

Saudi Arabia has stepped in to cover oil shortages stemming from the unrest in Libya.

But the chief executive of state-owned Saudi Aramco, Khalid Al Falih, refused to say how much additional oil it has pumped into the market.

Libya produces about 1.6 million barrels per day, and exports much of that to Europe. But the fighting has resulted in an at least 50% drop in production.

Saudi Arabia and other OPEC members have said previously they were ready to step in to compensate for any Libyan export losses.

Oil prices jumped above 99 dollars a barrel today in Asia as Libya’s problems, along with protests in Oman, raised fears political upheaval could impact other crude exporters.

No one knows whether Muammar Gaddafi or the rebels trying to overthrown him will end up controlling Africa’s biggest oil reserves.

There are fears Libya could turn into a fractured nation with competing armed groups ruling over rich and remote desert fields lying hundreds of miles apart from each other.

The chaos in Libya as it descends into virtual civil war has sent international oil prices skyrocketing despite the pledge from Saudi Arabia, the world’s largest oil exporter.

And that volatility is likely to continue, because it could take weeks or even months for Libyan production and exports to return to normal levels, experts said.

That has sent oil traders into a frenzy that will not calm down until there is more clarity about what is happening on the ground in Libya.

Libya produces just under 2% of the world’s oil, but its customers are overwhelmingly European. Hardest hit by the sudden oil shortage are European refiners that receive 85% of Libya’s exports, turning the country’s crude into diesel and jet fuel.

The biggest buyers are Italy, France, Germany and Spain – and Spain is so concerned it announced on Friday that motorway speed limits will be cut in to save fuel consumption.

The biggest problem facing oil companies and European consumers who depend on Libyan oil is a near-complete breakdown in solid information. Phones in Libya rarely work, Internet is intermittent, workers are fleeing and looters are grabbing what they can or pose a threat until order is restored.

Major container ship companies have suspended deliveries or pickups from Libyan ports with no word on when they might resume. Tankers that deliver to Europe have been told to stay more than 100 miles offshore and await information on whether they can safely dock and take on oil.

The massive oil terminal at Brega, Libya’s second-largest hydrocarbon complex, was nearly deserted over the weekend, with operations scaled back almost 90% because workers had fled and ships were not showing up.

Brega, about 125 miles west of the rebel stronghold of Benghazi, collects crude oil and gas from Libya’s fields in the south-east and prepares it for export. Since the crisis began on February 15 production has dropped from 90,000 barrels of crude a day to 11,000.

With storage containers and reservoirs rapidly filling up with oil and natural gas and no ships to take it away, production in the southern fields has been throttled back until Brega can clear some of its capacity.