Unfortunately that could be a big number. The UN Security Council approved a resolution by a vote of 10-0 with five countries abstaining to use "all necessary measures" to protect civilians in Libya.
That no-fly, no-drive resolution authorizes UN and GCC nations to use any means necessary to halt the flight of any plane or helicopter and also prevent the movement of tanks and artillery. This means Gaddafi's march on Benghazi is over. He had promised to "free" Benghazi from the terrorist gangs and liberate his people within 48 hours.
Unfortunately his people don't want to be liberated and they are fleeing to the Egyptian border to escape the bombing. Officials are expecting up to 100,000 refugees to cross into Egypt if Gaddafi forces are not stopped.
The UN moved quickly today after Gaddafi threatened to attack any military or civilian ship and plane in the Mediterranean if UN forces entered Libya. I think that was the step over the line that pushed the fence sitters into action. They realized a country leader that would attack any civilian ship or plane was somebody they did not want to continue in power.
They also fear for the lives of people in Benghazi. In the towns Gaddafi forces have recaptured there have been wholesale killings of suspected opposition forces. Civilians have been tortured to turn over names of rebels. Neighborhoods have been needlessly bombed and shelled. These are small cities and nowhere close to the 700,000 in Benghazi. Authorities feared a humanitarian disaster if Gaddafi forces were allowed to take the town. He warned in a televised statement "I am coming and there will be no mercy."
Unfortunately the rebels have lost a lot of fighters and families in the last two weeks since Gaddafi began pounding them with tanks, artillery and bombers. Just stopping the government forces now may be too late to save the movement. There may not be enough fighters left to take the fight back to Tripoli.
What may emerge is a broken Libya ruled by different factions and in a constant state of hostility. Oil production has completely shutdown and tankers are being ordered away from the ports. With Gaddafi back in control of the ports but rebels in control of many oil facilities it could be a long time before exports resume. I don't see a rapid end to this conflict or an end to the production halt for months to come.
We already know this is going to put a serious crimp in light crude supplies as the global recovery accelerates. Any further declines in production elsewhere could quickly raise prices.
We saw WTI move to $103 and Brent to $116 on Thursday. Worries over rising violence in Bahrain and the possible contagion into other countries was a factor. Nigerian MEND rebels claimed responsibility for an attack on an ENI oil installation late Tuesday. The rebels warned this was the first of many attacks on pipelines and flow stations ahead of the April elections. Nigeria produces light crude. In 2006-2009 the MEND rebels cut Nigerian production from 2.6 mbpd to just over 1.0 million using attacks on pipelines and terminals.
The Petroleum Association of Japan (PAJ) said it expects 780,000 of Japan's refining capacity to be restored next week. Exxon said its TonenGeneral refining arm has already restarted its 335,000 bpd Kawasaki refinery near Tokyo and was back at full production. Kyokuto Petroleum said it had restarted its 175,000 bpd unit at Ichihara.
PAJ said it had secured an additional import of 2.83 million barrels of crude by the end of March. PAJ also said local refiners had cancelled export of 4.09 million barrels of refined products for the rest of the month. PAJ believes the products will be needed in Japan. PAJ said it had also secured a commitment from local refiners to produce an extra 1.8 million barrels of refined products from increased production by month end.
It does not appear the much-discussed drop in demand from Japan is going to materialize. It appears we are seeing an increase in demand as I reported in these pages over the last several days. Fuel oil for electricity generation is expected to increase by 200,000 bpd. Diesel demand is already exploding and the availability of the fuel in the quake areas is already running low and they are just getting started in clearing the rubble.
In the U.S. the Philly Fed manufacturing report for February soared to levels not seen since Jan 1984 indicating the recovery in the U.S. is accelerating. If oil prices were to stabilize at the current level with gasoline around $3.25 in the U.S. we could see additional demand as summer approaches. Over $3.50 that demand will slow so we are right at the breaking point.
The point of this commentary today is to emphasize the lack of supply resuming from Libya or anywhere else in the near future. Also to emphasize Japan demand is increasing not decreasing at a time when the northern hemisphere is moving into its high demand driving season. Oil prices should not be going down in the near future.
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The OilSlick Newsletter is based on the expectations for global oil production of light sweet crude to peak and begin to decline in the 2012-2014 timeframe. I am calling this "Peak Sweet™" instead of Peak Oil. This is the point where global production of conventional light sweet crude supplies can no longer be supplemented by enough oil sands production, deepwater oil production, biofuels and natural gas liquids to offset the decline in existing fields. The roughly 6% annual decline of existing production due to depletion is larger than the rate of new discoveries and new production being added each year. The Peak Sweet™ countdown clock is ticking and time is growing short. Peak Oil will arrive shortly thereafter. Are you prepared?