Major banks warned on Thursday OPEC needs to act as oil prices near levels that could derail economic recovery and that an output loss from another producer after Libya would lead to global shortages and demand rationing.
Goldman Sachs (GS) issued a note saying the world would not be able to cope with another Libya-style oil production outage as Brent oil prices rallied by over $8.50 a barrel to near $120 a barrel amid unrest in Libya.
Key Libyan oil player, Italian oil firm ENI, said the OPEC member had lost three quarters of its production.
"The market cannot accommodate another disruption, in our view, with the problems in Libya potentially absorbing half of OPEC's spare capacity," Goldman Sachs' analyst Jeffrey Currie said in a research note.
"This makes the risks now associated with further contagion much higher than they were several days ago as further disruptions could now create severe shortages in global oil markets that would require substantial demand rationing".
Currie added, however, the high level of global inventory could easily accommodate a full outage of Libyan exports for more than 100 days and that OPEC spare capacity could easily absorb the entire loss if needed.
Barclays Capital (NYSE:BCS) said it saw no downward pressure on prices until more oil came to the market.
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