International banks are refusing to provide letters of credit (L/Cs) for Libyan oil exports according to a global oil analyst.

This means Libya's main source of income has for the moment dried up, despite efforts we understand are being made by the Central Bank of Libya (CBL) to restart L/C flows (DC World News, 3 March 2011).

Markets closed

Greg Priddy, an oil and gas analyst at Eurasia Group in Washington told the New York Times that the world market for Libyan oil is now virtually closed as international banks are refusing to provide L/Cs for the country's exports.

Meanwhile, no further news has emerged as to whether the CBL's ad hoc office in rebel-held Benghazi has made any progress in its efforts to restore L/C flows.

Production down

Even if L/Cs did become available, exports are likely to remain considerably lower than normal.

Libyan oil production is estimated to have dropped to around 300,000 to 400,000 barrels of oil a day (b/d) from its normal output of 1.8 million b/d.

Domestic consumption

At current production levels, this means Libya is still producing oil that would be worth between US$30-40 million on world markets - but it is doubtful whether this oil would leave Libya.

Several smaller Libyan refineries are reportedly still producing refined products, which may be destined for domestic consumption and to fuel Colonel Qaddafi's campaign against the rebels.

Limited impact

According to some reports, Libya's lack of oil export revenues is unlikely to cause financial hardship for Colonel Qaddafi's military operations.

Several reports suggest that the Libyan leader has several billions of US dollars in banks in Tripoli, which he is reportedly tapping into to provide cash incentives for his supporters and to pay for African mercenaries.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.