Oil Jumps As Libyan Oil Shutdown Deepens With Loading Halt At Five Main Terminals
The daily oil rollercoaster continues, and one week after tumbling to the lowest price of the year, oil is once again spiking, as news of more Libyan oil turmoil emerge.
Brent rose as much as 3% and briefly topped $80, after Libya suspended oil exports from five eastern ports, and the country’s output dipped further amid an escalating stalemate over who controls the central bank.
The eastern-based government ordered the halt of oil-loading operations at the ports of Brega, Es Sider, Ras Lanuf, Zueitina and Hariga, Bloomberg reported citing people familiar with the matter.
The terminals have a combined capacity of around 800,000 barrels a day, which means almost all of Libyan output remains landlocked. Libya, an OPEC member, is divided between eastern and western rival governments following a power struggle that has persisted for about a decade.
Libya, which pumps about 1.2 million bpd of oil, was plunged into a deeper political crisis earlier this month over a row about the leadership of the Central Bank of Libya, the only internationally recognized depository of the country’s oil revenues.
The Benghazi-based government in eastern Libya, which is a rival to the Tripoli-based government in the politically divided North African OPEC producer, said on Monday it would shut down all crude oil output and exports. The east-based government backed by military leader Khalifa Haftar is not internationally recognized, but Haftar and his people control most of the country’s oilfields.
Over the past weeks, the situation in Libya has deteriorated with the east-west rivalry flaring up again and centered on the leadership of the Central Bank of Libya—the guardian of Libya’s wealth and income from oil exports.
The internationally recognized government in the capital city in the west, Tripoli, is trying to replace Sadiq Al-Kabir, the governor of the Central Bank of Libya. This has led to the latest controversy between the eastern and western governments and political factions, threatening again to reduce Libya’s oil production and exports.
Additional support for prices today came from continued expectations of an interest rate cut in the United States next month. The positive movement is unstable, however, and we may see a reversal later in the day under the weight of bearish factors.
On the bearish side, Biden's EIA (which according to some is even more politicized than the BLS) reported only a modest draw in oil inventories yesterday, at less than 1 million barrels. Even though this was the second weekly draw in a row, it appeared to not have impressed the market much. Demand for oil remained a concern.
“Libyan output has dropped this week by close to 500k b/d, and this is not taking into account the shutting down of the Sharara oilfield earlier this month,” ING commodity analysts Warren Patterson and Ewa Manthey said in a note. “A prolonged shutdown from Libya will give OPEC+ a bit more comfort in increasing supply in 4Q24 as currently planned.”
The analysts noted that the Libyan outage will make OPEC+’s decision on whether to bring back some production more difficult and said they expected the cartel to resist that temptation and avoid a price rout.