Saudi to plug oil supply gap

Steve Dinneen
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TOP world oil exporter Saudi Arabia yesterday moved to calm fears of an oil-supply crisis, saying that it was in talks with European companies affected by the disruption in Libyan supply and is willing and able to plug any gaps in supply.

Oil industry sources said Saudi officials have been in touch with Spanish and Italian oil firms – among those hit by the Libyan shutdowns – on how to meet any shortfall.

Spain’s Repsol and Italy’s Eni are among the oil companies working in Libya that have had to slow or shut their Libyan oil output.

The Saudi sources said Saudi Arabia was able to pump more of the kind of high-quality crude produced by OPEC member Libya and that it could be shipped quickly to Europe with the help of a pipeline that crosses the kingdom.

Saudi’s intervention came as oil prices continued to rocket yesterday amid speculation Colonel Gaddafi may order the sabotage of the country’s oil facilities.

Brent crude futures for April delivery traded at $111.35 yesterday after retreating from $119.79 – their highest since August 2008 – as oil supplies began to show signs of disruption.

West Texas Intermediate crude for March delivery was down $1.36 per at $96.96. Investors also piled into perceived safe-haven assets such as the Swiss franc and gold – with both trading near record highs.

Oil prices have surged because of the unrest and disruption to supply in Libya. Refineries in Europe import about 80 per cent of Libya’s 1.8m barrels per day (bpd) of exports, analysts say. Up to 60 per cent of oil production in Libya has now been shut down. Oil traders are worried that the disruption in Libya means the market’s supply surplus would be insufficient if another Middle East producer became engulged in the crisis.

Julian Jessop, an analyst with Capital Economics, played down fears the contagion will spread to either Saudi or Algeria and said he expects oil prices to fall to $85 by year’s end.