February 25, 2011 3:22:09 PM
*
Saudi Arabia
ups output by about 700,000 bpd
* Key Libyan oil terminals in Libya held by rebels
* U.S. fourth quarter GDP revised lower
(Updates prices, adds U.S. GDP)
By Ikuko Kurahone and Nia Williams
LONDON, Feb 25 (Reuters) - Oil retreated on
Friday as a
senior industry official said top exporter Saudi Arabia had
increased
output to make up for any shortages as a result of a
disruption
to oil supplies
from Libya.
ICE Brent crude futures fell 23 cents at
$111.13 a barrel by
1511
GMT, slipping from $113.91 earlier in the day. They touched
a
two-and-half year high of $119.79 on Thursday.
U.S. crude futures <CLc1 fell 49 cents
to $96.78, off from
$99.20
earlier in the day. They hit $103.41 on Thursday, the
highest
since September 2008.
Credit Agricole CIB global analyst
Christophe Barret said
the
initial panic in the oil market was receding.
"Yesterday we had a very large shock;
it was the first time
we
had real disruption to supply and real disruption to exports.
But
this can be absorbed by regular market functioning, which is
what
is happening right now," Barret said.
"At the end of the chain you will have
OPEC increasing
production,
but it's not economical for Italy to ask Saudi
Arabia
directly for more oil."
Saudi Arabia has quietly increased its production
to more
than
9 million barrels per day (bpd), an increase of more than
700,000
bpd, a senior industry source familiar with Saudi
production
told Reuters on Friday.
"We have started producing over 9
million barrels per day.
We
have a lot of production capacity," the source said.
Reuters estimated Saudi output at 8.3
million bpd in
January.
OPEC's leading producer has come under pressure to lift
output
to stem the spike in prices.
In terms of the volume, the increase could
compensate for at
least
a part of the loss of Libyan supply due to civil unrest in
the
North African country.
The estimates of Libya's shut-in volume varies. The
International
Energy Agency said Libyan oil output had been cut
by
500,000 to 750,000 bpd due to the unrest, while Italian oil
company
ENI said as much as 1.2 million bpd might be down.
DIFFERENT OIL GRADES
Libya is an OPEC producer with normal output of
1.6 million
barrels
per day. Saudi Arabia is the only oil producer with
significant
spare capacity to meet global supply outage volume
such
as the reduction in the flow from Libya.
"Incremental production shut-ins that
challenge available
spare
capacity, should unrest spread, could lift prices
significantly,"
Morgan Stanley analyst Hussein Allidina said in
a
research note.
Morgan Stanley estimates Saudi spare
capacity near 4 million
bpd,
accounting for most of OPEC's total spare capacity at just
below
5.3 million bpd.
Some industry officials and physical oil
traders said the
difference
in qualities between Saudi and Libyan oils may make
it
difficult to fill in the supply gap immediately.
Italian refiner Saras said it would look to
alternative
crude
from other countries.
Key Libyan crude and oil product terminals
east of the
capital
are in the hands of rebels, who have seized control from
leader
Muammar Gaddafi.
Crude oil exports from Libyan ports and
terminals mostly
halted,
sources said.
On the macro economic front, the U.S.
economy, the world's
largest,
grew slower than initially estimated in the fourth
quarter.
Gross domestic product grew at annualized rate of 2.8
percent,
the Commerce Department said in its second estimate,
marking
a downward revision from its initial 3.2 percent
estimate.
(Additional reporting from Randy Fabi in
Singapore; Editing by
James
Jukwey and Jane Baird)
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