Libya oil tanks seen as 'time bomb'

The oil producing town of Ras Lanuf has seen some of the worst fighting in the last few hours.

Oil workers fear one wrong move from either side could see an oil or gas tank hit, causing a catastrophe.

They spoke to Al Jazeera's Tony Birtley.

Oil slips as OPEC mulls output, Libyans fight

Published on Wed, Mar 09, 2011 at 08:35 | Updated at Wed, Mar 09, 2011 at 09:27 | Source : Reuters

Oil prices slipped on Tuesday, with Brent falling nearly 2%, after Kuwait's oil minister said OPEC was considering a production boost as war-torn Libya's output remained disrupted and the region's unrest fueled concerns about more supplies being cut off.

The Organization of the Petroleum Exporting Countries has left official policy steady for more than two years, but analysts have said output has been informally rising.

Saudi Arabia has offered to help make up for Libya's shut output, estimated at about 1 million barrels per day of its normal 1.6 million bpd.

Brent crude for April delivery fell USD 1.98 to settle at USD 113.06 a barrel, having fallen as low as USD 112.13.

US crude futures for April delivery fell 42 cents to settle at USD 105.02 a barrel, above an early USD 103.33 low.

"The market is now waiting for the next piece of news to unfold," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.

"A turn for the worse for the market would be oil infrastructure being hit as a result of the fighting. The demise of the current regime or a more forceful statement from OPEC followed by an increase in production would be significant too."

Brent's premium to the US benchmark West Texas Intermediate crude ended post-settlement trading down USD 1.79 at USD 7.96 a barrel, down from a record of more than USD 17 last week.

US gasoline and heating oil futures settled lower, slumping with the Brent contract. High US gasoline prices may be hitting retail demand, which fell 1.8% last week against the previous week and was lower against a year ago, MasterCard said.

US oil inventory reports

US crude stockpiles rose 3.8 million barrels last week, with gasoline stocks falling 3.7 million barrels and distillate stock dropping 1.5 million barrels, the industry group American Petroleum Institute said in a report released late Tuesday.

Oil futures prices showed little reaction to the API data.

A Reuters analyst survey ahead of the API report yielded a forecast for crude stocks to be up 400,000 barrels, distillates down 600,000 barrels and gasoline stocks down 1.5 million barrels last week.

The US Energy Information Administration (EIA) will issue the government's oil data at 10:30 am EST (1530 GMT).

OPEC talks production boost

"We are in consultations about a potential output increase," Kuwait's Sheikh Ahmad al-Abdullah al-Sabah told reporters. But he added that the group had taken no decision yet to produce above existing output targets.

Saudi oil minister Ali Al-Naimi and others in OPEC said world oil markets were sufficiently supplied. Naimi said the kingdom held 3.5 million bpd of spare production capacity to meet any shortages.

Algeria's oil minister said he sees no supply deficits and Iran's OPEC governor downplayed the discussions, saying consumer worries were mostly "psychological."

With protesters in Kuwait gathering on Tuesday and calls for more Saudi protests later this month, investors remain on edge about unrest in the region.

Investment bank Goldman Sachs raised its oil price forecast and said it believed Saudi Arabia already had used up more of its surplus capacity than is widely thought.

US crude prices will average USD 102 a barrel in 2011, the U.S. EIA said, raising its forecast by USD 9 from February.

Battle for Libya

Libyan government forces attacked rebels on western and eastern fronts, intensifying their offensive to crush the revolt against Muammar Gaddafi.

US President Barack Obama and British Prime Minister David Cameron conferred by telephone and agreed "to press forward with planning ... on the full spectrum of possible responses," including a no-fly zone.

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