US firms stop Libyan oil trade due to sanctions

>LONDON (Reuters) - Major U.S. oil companies have halted trade with Libya and big banks have started to pull back from funding such deals because of U.S. sanctions, in moves that will further disrupt oil flows from the torn country. Around half of Libya's oil output, or over 1 percent of global supply, has already been choked off by lethal clashes between rebels and forces loyal to Libyan leader Muammar Gaddafi. Oil prices hit their highest levels since September 2008 on Monday.Exxon Mobil and Morgan Stanley have stopped trading oil with Libya, trade sources said on Monday.

"Around half of Libya's oil output, or over 1 percent of global supply, has already been choked off by lethal clashes between rebels and forces loyal to Libyan leader Muammar Gaddafi"ConocoPhillips also said it was not exporting oil from the country."We are in full compliance with U.S. sanctions," a Conoco spokesman said.Trading sources said the biggest European buyers of Libyan oil, including Italian refiners, continued to trade. But trade finance was becoming a problem, similar to big banks' reluctance to finance oil deals with Iran because of U.S. sanctions."Banks are blocking payments. You can't find one willing to make the transactions.

The cargoes that are being delivered haven't been paid for," said a trader with a European firm."There are fewer and fewer cargoes leaving Libya; production keeps dropping. Each tanker that is delivered could well be the last," he added."It's not worth seeing your name in the paper associated with Libyan deals," said Olivier Jakob, an analyst at consultancy Petromatrix. "Some companies buying from Libya will balance the reputational risk against what this trade will bring them."France's Total and Italian companies ENI and Saras were regular buyers of Libyan crude oil in the past.FALLING OUTPUTMost estimates suggest around half of Libya's 1.6 million barrels per day (bpd) of oil production capacity has been suspended due to clashes between government forces and rebels.Some trade sources expect other oil companies to follow U.S. firms' lead and stop trade with Libya, effectively halting exports to the international market."Players won't be able to buy Libyan crude even if it's there. It won't matter if they are producing or not," said a crude oil trader.A trader working for a non-U.S.

"Oil prices hit their highest levels since September 2008 on Monday.Exxon Mobil and Morgan Stanley have stopped trading oil with Libya, trade sources said on Monday"oil major said that U.S. citizens were now forbidden from dealing with Libyan oil."Sanctions and legal restrictions recently imposed on Libya could complicate a return to normal trade and commerce," said Michael Wittner from Societe Generale. 1 2 Next World Libya Tweet this Share this Link this Digg this Email Reprints