(Reuters) - Wall Street bank Morgan Stanley (MS.N) has stopped trading oil with Libya, a trade source said on Monday, in an early indication that sanctions could hit exports from the north African producer.

The firm canceled all crude oil and refined products in the past week "due to the OFAC," the source familiar with the firm's transactions said, referring to the U.S. Office of Foreign Assets Control, which controls trade sanctions.

President Barack Obama signed an executive order on February 25 freezing the assets of Libya's President Muammar Gaddafi, his family and top officials, as well as the Libyan government and the country's central bank.

Traders said Morgan Stanley has regularly sourced oil from the North African country to feed the UK Grangemouth and the French Lavera refineries but did not know how much the bank was buying from Libya.

The bank also traded gasoline with Libya, sources said.

Morgan Stanley declined to comment.

Most estimates suggest around half of the country'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 the bank's lead and halt oil 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.

Austrian energy group OMV (OMVV.VI) said on Monday it was still getting oil from Libya despite severe output disruptions.

(Reporting by Emma Farge; editing by Anthony Barker)

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