Crude-oil futures traded higher in Asia this Tuesday morning, on expectations that a resumption of Libyan pre-war level oil production would take some time.
John Vautrain, a director at energy consultants Purvin Gertz, said:
“I think there was a lot of euphoria on Monday. But the whole country is not completely pacified yet and we don’t have an organised government.
“It could take months before oil can start to flow again from Libya.”
“Libya is an economy where oil and gas is important, so I’m sure whatever government is formed will make it a priority to get the industry up and running again,” said Allister Langlands, chief executive officer of Wood Group, on a call with journalists today.
Goldman Sachs said Monday that the rebel takeover in Libya increases the likelihood that the country’s oil production will return faster than had been expected.
“These developments raise the question of whether crude oil production in the region as well as exports can normalize in coming months,” the investment bank said in a report.
According to Reuters, this morning at 7:03 a.m. EDT, Brent crude was up 18 cents lower to $108.54 a barrel. U.S. October crude was up $1.12 to $85.54, supported by expectations that U.S. oil stockpiles released later in the session may drop.
Libya would be able to restart some oil output in a few months, said Shokri Ghamen, the country’s former top oil official on Monday, but it would take as long as 18 months to reach the pre-war level.
On the same time, European shares bounced on Monday after a steep sell-off last week, with Italy’s ENI
among the main gainers on hopes that a new political regime in Libya will help it restore oil production activities to former levels.
“This is good news for Eni but to be reassured we’ll need to know what plans the rebels have and whether they can quickly pacify and manage the country,” said Massimiliano Romano, head of research at brokerage Concentric Italy in Milan.
“Between that and getting production going again I think it will take some time before the companies are making money in Libya again.”
Also, British energy giant BP said on Monday that it would seek to return to Libya to continue its exploration programme “when conditions allow” as dictator Muammar Gaddafi faces imminent defeat. BP has not yet entered into any commercial transactions with the Transitional National Council of Libya.
Before production came to a near halt, most of Libya’s high-quality crude went to European refiners – particularly in Italy.
photo credit: BOB STRONG/REUTERS