Oil production almost stopped in Libya: IEA

AFP , Tuesday 15 Mar 2011

Agency warns of economic dip if oil prices stay high

Oil production has almost ground to a halt in Libya due to the unrest there, the International Energy Agency said Tuesday, warning that there will be a marked economic slowdown if oil prices remain high.

"What is becoming clearer is that the country's oil exports of some 1.3 million barrels per day will remain off the market for a considerable time due to both war inflicted damage... and international sanctions" on Libya, the IEA said in its report.

The current high oil prices "entail significant downside risks to this year's outlook," it added.

Crude fell in Asia on Tuesday as traders continued to assess the impact on demand caused by the Japanese earthquake and nuclear crisis, analysts said.

But continuing unrest in the crude-producing Middle East is also on investors' radar, analysts said.

Saudi Arabia on Monday sent troops into Bahrain to help restore order in the Gulf kingdom amid pro-democracy protests.

The price of Brent crude has risen by around 50 per cent in the last six months, first on very strong demand as global economies picked up post-recession and, this year, "on increased regional geopolitical risk in North Africa and the Middle East, embodied by Libya’s supply outage," the IEA said.

"If prices remain at current levels or rise further, by September 2011, if not before the global economy may feature a marked slowdown," the report warned.

This effect would be exacerbated by government's expected fiscal tightening if inflationary pressures become entrenched, added the IEA which represents the interests of industrialised

While admitting that estimating price impacts is "notoriously difficult," due to the many variables, the agency suggested a 10 per cent increase in the price of oil could cut global growth by between 0.2 and 0.7 percentage points after one year, and possibly by twice as much in the second year.

New York's main contract, light sweet crude for delivery in April, dipped $2.12 to $99.07 per barrel, while Brent North Sea crude for April lost $2.25 cents to $111.42 in Asian afternoon trading.

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