Bloomberg News

Goldman Says Libya Oil Exports May Rise, Sees ‘Choppy’ Price

June 22, 2011

(Updates with comments in third paragraph.)

June 22 (Bloomberg) -- Libyan oil exports could rise by as much as 355,000 barrels a day in the short term from the opposition-controlled part of the country after rebels pledged to resume shipments, according to Goldman Sachs Group Inc.

Libya, holder of Africa’s largest oil reserves, has seen production drop from about 1.6 million barrels a day in January, before fighting started between opposition forces and troops loyal to leader Muammar Qaddafi, to 200,000 barrels in May, according to Bloomberg estimates. Libyan rebels expect to produce 100,000 barrels of oil a day from fields they control, Ali Tarhouni, the rebel finance minister, said June 9.

“Over the short term, the opposition forces could resume about 200,000 barrels a day of crude exports as some fields and their related export terminals are largely intact,” Goldman analysts including New York-based David Greely, said in a report dated June 21. “A further 155,000 barrels a day could potentially be exported at a later stage from a second loading port under their control.”

Exports could climb as high as 585,000 barrels a day if Qaddafi is removed from power and production is resumed from western fields currently held by the government, the bank said. Bringing back the remaining 1 million barrels a day of exports will be “much more challenging”, according to the report.

“Not only are the export terminals currently under the control of the Qaddafi government, but news reports also suggest that some of the installations have been severely damaged,” the analysts wrote in the report.

Light Crude

The loss of light, low sulfur crude from Libya has driven the price of similar supplies higher relative to other global benchmark grades. Refiners favor this type of oil because it yields a larger proportion of gasoline and diesel after basic processing than heavier crude.

Brent, the European marker grade, has climbed to a record $22.29 a barrel over New York’s West Texas Intermediate oil futures and to a premium of $8.35 to Middle East Dubai, the highest for data going back to August 2006.

Oil prices are likely to remain “choppy in the near-term” before rising over the second half of the year, according to the report. New York futures have dropped 5.8 percent since June 14 on concern that the U.S. economy is slowing and Europe’s debt crisis is threatening growth.

“Our economists view the current slowdown as largely transient and we expect upward pressure on oil prices to increase in the second half of 2011 as slower, but sustained, oil demand growth draws on inventory and OPEC spare capacity,” the analysts wrote.

--Editors: Alexander Kwiatkowski, Jane, Ching Shen Lee

To contact the reporter on this story: Christian Schmollinger in Singapore at Christian.s@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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