From Eurasia Group's global oil analyst, Greg Priddy:
"While officials at Arabian Gulf Oil Company (Agoco), the Libyan NOC subsidiary in eastern Libya, have spoken of setting up an alternate arrangement to market their oil, this should be taken very skeptically given the absence of an internationally recognized alternative payment mechanism which will be acceptable to buyers. While there may be a trickle of Libyan exports, the majority of Libyan crude oil export volumes will probably be offline for months, not weeks.
In this context, and given the continuing unrest across the Middle East and North Africa, the focus of the market is on the potential for further outages, causing a hypersensitivity to headline risks. While Saudi and other GCC spare capacity is able to cover Libyan volumes, any further disruption would bring spare capacity down to a level which would be cause for genuine alarm -- reintroducing some (but not all) of the market dynamics that drove prices to $147/barrel in 2008."
A Facebook group calling for a Saudi "Day of Rage" on Friday has attracted about 20,000 members; on Wednesday, the Kingdom arrested an opposition religious leader in the country's Eastern Province - home both to an unhappy Shia minority and the world's largest oil field - and, according to one unconfirmed report, has shot dead an administrator of the Facebook group.
With Libyan oil supply expected to go offline for, as Eurasia estimates, "months, not weeks", much focus will be on Saudi Arabia's ability to step in and replace that lost supply. There are doubts if the Kindgom can even physically manage it; more importantly, if political unrest takes hold in Saudi, any signal from the West that it supports the aspirations of Saudi protesters will make the country's rulers far less inclined to do the world a favour and keep oil prices down.
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