Europe’s prospects of receiving Libyan oil shipments would be weeks away even if rebels were quickly removed from the international sanctions list, as big buyers say shipping and legal risks are still a concern.
A senior Libyan rebel official said on Sunday Gulf oil producer Qatar had agreed to market oil produced from east Libyan fields that are no longer under the control of Muammar Gaddafi.
On Monday, Qatar became the first Arab country to recognise Libya’s rebels while a United States Treasury Department official said crude oil sales by Libyan rebels would not be subject to US sanctions if they were not connected to Gaddafi’s government entities.
Trading sources told Reuters they did not think the latest developments would easily unblock Libyan oil trade, which has been suspended for weeks due to sanctions and heavy fighting.
“I still cannot touch this crude. I guess dozens of things need to happen — both internally and externally — for me to start looking at it again,” said a trader with an oil major.
Two Italian firms, which have previously been among major buyers, also said they had not yet been approached by rebels, although offers to sell crude were still coming from Libya’s National Oil Company, controlled by the government.
“Even though Qatar recognised rebels in Libya, this is not in line with the United Nations resolutions. We all have to comply with UN sanctions,” a trader with an Italian firm said.
The rebel official in charge of the economy, Ali Tarhouni, said over the weekend he expected the next shipment to take place in less than a week and that an escrow account monitored by auditors had been set up.
Libya produced about 1,6-million barrels of oil per day before the crisis, or almost 2% of world output.
Emboldened by the Western-led air strikes against Gaddafi’s forces, the rebels have quickly reversed earlier losses and regained control of all the main oil terminals in the east of the OPEC member country.
International sanctions are designed to cut off funding to Gaddafi but trading and shipping sources said a clarification of sanctions would not immediately reopen business.
“It goes beyond the sanctions issue. It’s all about having clear title. You have to be 110% sure you have legal title, and it will take months to sort it out. You want to know who you are paying,” said an oil trader working for a bank.
“We need to understand are we are trading with, what sort of company is selling crude, who controls it, who manages it. Can we sign ship-owners to the area, and if we can, what sort of risk premium we are talking about,” the trader with a major oil company said.
Ship brokers said there had been no indications of fresh cargoes being booked from Libya.
“It will be hard to find an owner willing to enter in to Libyan waters due to safety,” a shipping source said.
Shipping sources have also said Western sanctions on Libya’s government have already hurt shipping, with a virtual shutdown of its vital seaborne trade on the cards.
John Drake, a senior risk consultant at UK-based consultancy Ake, said a major problem would be to bring back specialist staff to get operations at fields and ports restarted.
“Insurance may also be more of a challenge. It’s also difficult at the moment to know what kind of authorities you might be dealing with in the rebel areas.”
Meanwhile, the leaders of France, the US, Britain and Germany have begun a conference call to discuss the situation in Libya and plans for a meeting in London on Tuesday, a French presidential source said.
Presidents Nicolas Sarkozy and Barack Obama, Prime Minister David Cameron and Chancellor Angela Merkel will discuss a Franco-British proposal to help pave the way for a political transition in Libya, the source said. — Reuters