New threats emerged to Libya's dwindling oil supply yesterday when Germany's foreign minister urged a freeze on payments for oil shipments to the regime of Muammar Qaddafi.
Crude oil prices continued their upward trajectory despite Saudi Arabia's move to compensate for the loss of 800,000 barrels per day (bpd) of oil supply from Libya by raising its production.
"We want to stop money flows to the regime," Guido Westerwelle, the German foreign minister, said yesterday.
Several other nations are in agreement with the proposal to freeze payments for 60 days, he added.
Saudi Arabia's decision to increase supply was welcomed by the International Energy Agency (IEA), which is concerned that sustained oil prices above US$100 a barrel will jeopardise global economic growth.
"What Saudi Arabia did in the last few days was exemplary," said Dr Fatih Birol, the chief economist of the IEA, an organisation based in Paris that represents the interests of oil-importing countries. "Once again they proved that they are the central bank."
If the price of oil stays at an average of $100 a barrel this year, the EU will have to pay $400 billion for oil imports, equal to 2.2 per cent of GDP, Dr Birol added. Europe's oil bill has represented an average of about 1.5 per cent of GDP over the past 25 years.
The price of Brent crude, a European benchmark, was above $114 in intraday trading yesterday, below last week's high of almost $120.
In Libya, where Col Qaddafi has resisted a sustained popular uprising, output is down by about half, said Libya's National Oil Corporation. Libya, a member of Opec, was producing about 1.7 million bpd before protests began.
China National Petroleum Corporation halted crude oil shipments from the eastern region of the country last week, although limited flows resumed on Sunday.
The UAE, which has Opec's highest level of spare capacity after Saudi Arabia with about 500,000 barrels, also stands ready to increase production if required, Mohammed al Hamli, the Minister of Energy, said last week.
Libya's oil infrastructure, clustered on the eastern side of the country, remains vulnerable to attack by both Col Qaddafi's supporters and the opposition, the investment bank Merrill Lynch wrote in a note to clients.
"With Libya apparently at risk of a civil war, there are reasons to believe that oil supplies in that country could be off for months," Merrill Lynch wrote.
In Oman, which pumps about 890,000 bpd, protesters blocked access to the port of Sohar but did not jeopardise production or exports, said government officials.
Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, has stakes in an enhanced oil recovery project and exploration wells in Oman through its subsidiary, Liwa Energy. Those operations, some 1,000km from the protests in Sohar, have been unaffected by political protests, said two people familiar with Mubadala's operations in Oman.
Mubadala also has a 32 per cent stake in a gas development with Occidental of the US and Oman Oil Company.
* with agencies