Oil prices climbed higher as a battle for Libya’s Sidra and Ras Lanuf ports delays crude shipments
Crude oil prices rose over 1% this morning as fighting for one of Libya’s key oil ports delayed shipments out of the country. The Libyan ports of Sidra and Ras Lanuf changed hands twice over the weekend, preventing oil shipments from departing, and raising concerns over whether or not the OPEC member will be able to increase exports as quickly as it had hoped.
Last week, Libyan officials said they hoped to resume crude sales from Ras Lanuf and other ports, potentially bring back 300 MBOPD to already oversupplied global markets as the country struggles to maintain exports amid a civil war. The news that Libya, and fellow OPEC member Nigeria, might increase crude exports after declaring force majeure, created downward pressure on oil prices last week, leaving U.S. oil prices at a one-month low of $43.03 last Friday.
The Petroleum Facilities Guards, a militia that until this month had controlled Libya’s oil ports for years after the 2011 ouster and death of Moammar Gadhafi, briefly retook Sidra and Ras Lanuf in the country’s central coast Saturday night. The guards were pushed out Sunday by the Libyan National Army, a militia that had pledged to reopen the ports for exports, reports The Wall Street Journal.
Since Gadhafi’s ouster, militia have divided Libya between the east and west and sought to exploit its oil riches. A unity government in Tripoli and the country’s National Oil Co. are now working with the Libyan National Army to secure the ports and restart oil exports.
Muftah Mgerief, a Libyan National Army commander, said that his forces had fought back and that the multiple air raids were carried out to take back Ras Lanuf and Sidra from the Petroleum Facilities Guards.
Investors remain uncertain about increased exports from Libya
The battle for control of Libya’s oil exporting facilities has left investors wondering if the country can in fact increase crude shipments out of the country. Libyan oil production currently stands around 300 MBOPD, but officials say they could ramp up production quickly if the ports remain open and secure for an extended period.
Following the weekend’s fighting, “the expectation of a rapid normalization of Libyan oil exports is likely to prove illusory,” said Commerzbank in a note.
A coordinated production freeze from OPEC is not expected
Members of OPEC, including Saudi Arabia, have said that they will explore coordinated action to support oil prices, leading many to hope that the group might end its meeting in Algeria next week with a plan of action. OPEC Secretary General Mohammed Barkindo said no decision would be made at next week’s meeting however.
“It is an informal meeting, it is not a decision-making meeting,” he said, dampening hopes that any agreement could be reached to cap production in order to boost prices.
Venezuelan President Nicolas Maduro said OPEC and non-OPEC members are nearing an agreement, however.
“We’re close to a deal between OPEC producer countries and non-OPEC,” he told a news conference after meeting with Iranian President Hassan Rouhani.
Venezuela’s economy has been tittering on the edge of collapse as the oil-dominated economy struggles to adjust to lower prices. Inflation in the country is expected to reach 1,640% this year as the economy deteriorates to the point where common consumer goods like Coke-a-Cola and beer are no longer available.
