"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Tuesday, March 15, 2011

International Energy Agency: Libyan Oil Exports Halted

As the world focuses on the Nuclear disaster in Japan, another crisis is far from resolved. Actually, it is intensifying.  The issue is Libyan oil production: according to the IEA, it has ground to a halt.  From the Associated Press:
CAIRO — The International Energy Agency says Libyan oil exports have "ground to a halt" because of the fighting between rebels and forces loyal to Libyan leader Moammar Gadhafi. 
The Paris-based group said Tuesday in its latest oil market report that production from the North African nation appeared to have "slowed to a trickle" as the fighting and mounting unrest prompted an exodus of foreign oil workers and led international companies to halt their operations. 
Analysts have said they believe that oil production and exports from the OPEC member are sharply down because of the unrest. 
The violence had driven oil prices as high as almost $107 per barrel last week before they cooled quickly following the massive earthquake in Japan.

However, according to Reuters Africa:
TOBRUK, Libya (Reuters) - Agoco, an oil firm based in rebel areas, said on Tuesday it was now only pumping oil to Tobruk in the far east of Libya after Muammar Gaddafi's forces retook Ras Lanuf, where it has facilities. 
Arabian Gulf Oil Co (Agoco) management board member Hassan Bulifa also told Reuters that output from the firm's fields was holding steady at one-third of its normal production levels. 
Agoco had previously said it was producing about 130,000 barrels per day (bpd), compared to about 400,000 bpd before a rebellion against Gaddafi's rule erupted in mid-February. 
"We stopped pumping oil to Ras Lanuf. Production at our fields is still about one-third of normal output but now all the oil is being pumped to Tobruk," he said. "We have a tank farm, a storage facility, there." 
Bulifa said it would take about three weeks to fill up the storage available at the current rates of production. On March 10, he had said storage could be filled in two or three weeks.

Either way, this is another issues the markets need to contend with.  Will Saudi Arabia, as it deals with Bahrain, and will other OPEC members be able to fill the void?  The Japanese Nuclear disaster may have pushed oil down as the market fears a drop in demand.  But if we are to have a sustained global recovery, oil can not continue to rise.

Not only do we have the human catastrophe in Japan to be concerned about, but we still have the Euro crisis, as well as the political turmoil in the Middle East to contend with. The Federal Reserve meets today.  It will be interesting to see what they have to say.  The issue of QE2 ending in June is high on the list.  Wall Street is looking kind of nervous right now.

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