LONDON Feb 24 Oil production in Libya is
expected to shut down completely and could be lost for a
prolonged period of time, Bank of America Merrill Lynch said on
"We expect Libyan production to be shut down completely and
we might lose sweet crudes from Libya for a prolonged period of
time," Bank of America Merrill Lynch analyst Sabine Schels told
Schels said that the world faced the prospect of real
supply shock in which the loss of 1.6 million barrels per day
of sweet oil could potentially trigger a steep rise in prices
and force a sharp reduction in demand to balance the system.
"Some of the supply can be replaced with Saudi light crude
and some from SPR, but if the disruption is prolonged, we will
need demand to drop to balance the system," Schels said.
The bank is currently discussing scenarios and outlooks,
and will publish a report on its findings in the coming days.
"We already faced a demand shock last year with global
demand increasing by 2.8 million bpd and on top of that, what
we have now is a real supply shock," Schels said.
"In a price shock scenario whereby we lose 1.6 million bpd,
the rise in prices can be a lot greater than in the case of a
(Reporting by Jessica Donati; editing by Marguerita Choy)