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Saudi Arabia to Replace Libya Oil

Source: Bloomberg 2/24/2011, Location: Middle East

Saudi Arabia and other OPEC nations including those in West Africa are willing and able to replace any lost Libyan oil as soon as companies ask for it, including crude of the same quality, a Saudi Arabian oil official said.

There is no reason for oil prices to rise because Saudi Arabia and OPEC won’t allow shortages to exist, the official said by telephone today, declining to be identified by name.

As OPEC’s statute indicates, it is the responsibility of the group to ensure that the market is well balanced and that there is no shortage of supply, the official said.

Exporters are under pressure to ensure adequate supplies to the market after violence in Libya, Africa’s third-largest producer, sent Brent crude oil futures in London to as high as $119.79 a barrel earlier today, the highest since August 2008. Brent retreated below $116 after the Saudi official’s comments were reported.

Some West African oil which goes to Asian markets can be redirected to Europe, and extra Saudi oil can go to Asia to replace the West African supplies, the official said. OPEC’s West African members are Nigeria and Angola.

OPEC collectively pumped 29.4 million barrels a day last month, according to Bloomberg estimates, and has about 5 million barrels a day of spare capacity, according to the International Energy Agency. Most of the unused capacity is in Saudi Arabia, the organization’s biggest producer.

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