While the oil market is looking for clues about losses of supply from Russia, the perennial wild card in crude production globally, Libya, has seen its output swing up and down again over the past weeks.
The return of blockades on oilfields and export terminals amid renewed political rivalry is depriving the market of some of Libya’s oil production at a time of tight global supply. This market tightness is likely to tighten further when the EU embargo on seaborne Russian oil imports officially begins at the end of this year.
Libya’s oil production, typically at around 1.2 million barrels per day (bpd) without blockades on oil infrastructure, has been lower in recent weeks since factions in the east renewed blockades on export facilities. The political rivalry also blurs the estimate of Libyan output and shipments with contradicting claims about how much production the country is losing during the protests at oilfields and oil ports.
Currently, there is no immediate resolution to the renewed rivalry, which means there are unlikely to be elections this year. The political turmoil will continue to weigh on the Libyan oil sector, which is the key revenue source for the country. The distribution of revenues has been the bone of contention between the Tripoli-based and east-based institutions for years.
Amid the political instability, Libyan oil production is also unstable, and shutdowns of exports could occur at any time, further tightening the global oil market, which is already tight on supply.
It’s unlikely that Libya will descend into a full-blown civil war again, Fathi Bashaga, the Prime Minister appointed by the parliament earlier this year, told Bloomberg in an interview, but noted that chaos would continue without a unified government, with little chance that elections will be conducted yet this year. Bashaga was expected to be a candidate in the presidential election that was slated to be held last December but was called off.
Bashaga, backed by the east, told Bloomberg that people in the eastern part of Libya “are angry and unsatisfied with the state and as long as justice is not addressed and revenues are not distributed fairly, closures of oil will continue.”
The blockade of Libyan oil production and export facilities could end once the central bank of Libya releases funds for the budget the east-based Parliament has approved, Bashaga told Reuters last week.
Bashaga was appointed as Libyan prime minister by the parliament based in the east of the country in March. However, Prime Minister Abdul Hamid Dbeibah, who was appointed last year through a process backed by the United Nations, refuses to cede power.
Bashaga is now based in Sirte in the east of Libya, while the rival prime minister is based in Tripoli.
The renewed power struggle in Libya led in April to major shutdowns of oilfields and oil export terminals, which reopened briefly earlier this month, only to be closed again by protesters demanding a transfer of powers from Dbeibah, who has been refusing to step down for Bashaga. The blockades of oil ports have been mostly instigated by factions in the east, including such allied with eastern strongman Khalifa Haftar and the Libyan National Army (LNA) he leads.
As of the middle of last week, Libya was producing only about 100,000-150,000 bpd of crude oil, oil minister Mohammed Aoun said.
However, a western diplomat told the Financial Times that production was actually around 700,000 bpd, and while it fluctuates down by 30-40 percent these days, it’s not as low as the minister claims.
“We are aware of the oil ministry claim that Libyan oil production dropped to 100,000 barrels per day,” a western diplomat told FT. “However, we believe that to be inaccurate; actual production is significantly higher.”
The lack of official communication from the National Oil Corporation (NOC) about port and oilfield closures and blockades in recent days adds to the confusion about how much oil Libya really pumps.
Whatever the actual figure is, the oil market shouldn’t rely on a stable 1.2-million-bpd production from Libya this year.
By Tsvetana Paraskova for Oilprice.com
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