Crude oil prices may easily break record highs if the unrest in Libya and the rest of the Middle East and North Africa spreads to more major oil producing countries, a senior energy analyst said on Monday.
Any serious turmoil in Saudi Arabia or other oil producing countries would definitely have a great impact on the global oil supply, Phil Flynn, energy analyst at PFGBEST Research in Chicago, told Xinhua in an interview.
“The reason why we are not at 147 dollars per barrel right now is that countries like Saudi Arabia, the world’s largest producer, has pledged to make up for any loss of oil that came out of Libya, so we have that buffer right now,” Flynn said.
“We really cannot afford to lose Saudi Arabia or to see the unrest spread to another major oil producing country, because if we do, it will very easily push the prices to 147 dollars a barrel again,” he added.
Crude prices have risen sharply since unrest started in Libya in mid-February, jumping as high as 106.95 dollars a barrel earlier this month.
But recent market action showed signs that crude prices may have topped out and even could be drifted lower, especially if Libyan exports do resume.
Flynn admitted the Libyan unrest and the following airstrikes may only have a moderating impact on the crude oil market, as recent reports showed the rebels were getting back to the very important oil producing areas and claimed they could produce up to 1.5 million barrels of oil per day right now, quite close to the pre-war level of 1.6 million bdp.
“Right after the war that crude oil coming out of Libya fell to a trickle, now we are seeing the oil production go back up, so, there’s a lot of hope that perhaps we can see some stability and more oil production,” said Flynn.
“The price of oil is actually receding a little bit because we are optimistic we will make a happy ending for the global oil market,” he added.
But he pointed out that a deeper impact of the Libyan conflict on the oil market, rather than the loss of Libyan oil for a few months is the contagion fear that the same-type of unrest may spread to the entire region.
“Even if we get a very happy outcome for Libya’s tomorrow, let’s say Gaddafi packed his bags and decides to leave town and left a stable Libya, look at all the other countries in the region that are facing unrest, and that may even encourage uprising in other oil-producing countries,” he said.
If that happened, it could keep the oil price elevated for a long time, Flynn said.`
Many analysts predict that Libya would devolve into another Iraq. And Iraq’s oil output following the wars is serving as a model for energy analysts trying to assess how long Libyan oil could be unavailable to European and other refiners.
But Flynn remained optimistic. “I am hopeful that we will have a positive outcome, we actually got some news out of Iraq this week that they expected their oil production to go up dramatically this year. So I am hopeful that a new government in Libya could actually produce more oil.”
“It’s very possible that we could see even more oil production come out of Libya in the post-Gaddafi world than we did with Gaddafi in power with all the sanctions,” Flynn said.