Libya passing 1.1 MMbpd makes OPEC’s price-leveling job harder

By Salma El Wardany on 11/11/2020

(Bloomberg) --Libya boosted oil output to more than 1.1 million barrels a day, inching closer to the level it was producing at before the country’s civil war all but shut down its energy industry in January.

The OPEC member, home to Africa’s largest crude reserves, ramped up production as output at its biggest oil fields including Sharara and Waha increased, according to a person familiar with the situation who asked not to be identified because the information isn’t public. It’s the first time Libya has reached this landmark since early January.

The nation was producing about 1.2 million barrels a day before its energy sector was mostly shuttered that month when Khalifa Haftar, a Russian-backed commander based in the east, blockaded ports and fields. Haftar, who was battling the United Nations-recognized government of Prime Minister Fayez al-Sarraj, lifted his blockade in mid-September after winding down hostilities in June.

The additional Libyan barrels are an unwelcome challenge for OPEC+, the coalition of the Organization of Petroleum Exporting Countries and other producers such as Russia. The group was set to increase output by almost 2 million barrels a day in January as part of a plan to ease the cuts that began in May at the height of the coronavirus pandemic. It may be forced into a delay with crude prices under pressure.

Brent crude rose on Wednesday to $45 a barrel in London for the first time in 10 weeks as an apparent drop in U.S. crude stockpiles added to an earlier rally driven by a virus vaccine breakthrough. Even so, the benchmark is around 32% lower this year.

Peace Talks

Libya’s resurgence -- it was producing less than 100,000 barrels a day in early September -- has taken oil traders by surprise just as renewed coronavirus lockdowns in Europe and accelerating cases in the U.S. stifle energy use. The country aims to pump 1.3 million barrels a day by the beginning of 2021, National Oil Corp. Chairman Mustafa Sanalla said in an Oct. 31 interview.

Production is reviving as Libya’s warring sides started talks this week on charting a path to elections and a unity government. The discussions in neighboring Tunisia were launched after military leaders from the Tripoli-based government and their eastern rivals reached a permanent cease-fire and agreed to work toward the withdrawal of foreign fighters. The country’s comparative period of calm has allowed the NOC to lift force majeure at its facilities and restart crude production nationwide.

The talks are part of a broader effort spearheaded by the United Nations in a push to end nearly a decade of strife that has ravaged the North African oil exporter.

“Once again, NOC and its partners have surprised markets with the speed at which they can restore shut-in oil production,” said Bill-Farren Price, a director at London-based research firm Enverus.

“So far the signs are good, and it appears Libya has turned a corner,” he said. “Everything now depends upon whether the cease-fire can be made to stick -- and that piece of the puzzle will require genuine commitment -- not just from the warring parties on the ground, but from their regional and international backers.”

Related News ///

FROM THE ARCHIVE ///

Comments ///

Comments

{{ error }}
{{ comment.comment.Name }} • {{ comment.timeAgo }}
{{ comment.comment.Text }}