Libyan oil output has collapsed since mid-April, after protesters forced the closure of several fields and ports. A tussle between rival administrations for control of the country shows no sign of ending, and demonstrations over fuel and power shortages are spreading.
“We lost half of the Libyan supply, and the other half is at high odds of going off in the coming weeks,” said Bob McNally, president of Washington-based consultant Rapidan Energy Group and a former White House official.
The crisis comes just as oil importers call out for more supply. Crude prices surged above $100 dollars a barrel after Russia’s invasion of Ukraine, and the West’s imposition of sanctions on Moscow. This poses the biggest disruption to the market in decades.
Oil prices have fallen in the past month, amid fears of recessions in major economies. Yet they remain up almost 30% this year, with elevated fuel costs leading to higher inflation and exacerbating a cost-of-living squeeze.
US President, Joe Biden will try to persuade Gulf States to pump more oil when he travels to Saudi Arabia on Friday. He also said he’ll address the Libyan “political gridlock.”
Libya’s conflict “has reached high levels of complexity,” said Illiasse Sdiqui, an Associate Director at risk-management company, Whispering Bell. “In all scenarios, the outlook for the oil sector will remain sporadic and sustained production levels are unlikely.”
Exports from the country, home to Africa’s largest oil reserves, declined to a 20-month low of 610,000 barrels a day in June, according to data compiled by Bloomberg.
The state-run National Oil Corporation (NOC) suspended shipments from the key ports of Es Sider and Ras Lanuf two weeks ago. The nearby terminals of Brega and Zueitina haven’t handled any crude for almost two months, though the NOC lifted its force majeure — a legal clause allowing it to halt exports — this week.
The nation has been mired in strife since the fall of longtime leader Muammar Gaddafi in 2011, with oil routinely exploited for leverage by warring parties.
A ceasefire in mid-2020 has largely held, but remains increasingly fragile after Presidential elections scheduled for December 2021 were postponed indefinitely.
In Tripoli, tensions have heightened over the standoff between the government led by Abdel-Hamid Dbaiba, and a rival one endorsed by the eastern-based Parliament, led by Fathi Bashagha.
Libyans fear the crisis will derail efforts to get the elections back on track, and could return the country to territorial partition and civil war.