Libya may put global oil market balances under risk
Baku, Azerbaijan, July 26
By Aygun Badalova - Trend:
As political situation in Libya is slowly stabilizing, the country's role in the global oil market may be decisive, considering that Libya is a large global oil producer and OPEC member.
Market balances would shift meaning fully if Libya were to reach oil production of 700,000-800,000 barrels per day, analysts of the US JP Morgan bank believe.
In their weekly Oil Market report, obtained by Trend, analysts noted that an increase in volume of Libyan supplies to world crude markets has proven elusive in recent quarters.
Yet recent months have seen a UN sponsored unity government formed which has resulted in the National Oil Company being reintegrated. Progress towards restarting an increasing share of output is underway, analysts said.
While political challenges remain, the restart of production in the east of the country looks closer now than at any time in the past year, JP Morgan’s analysts believe.
Since 2014, Libya has been split between rival governments and parliaments based in the western and eastern regions, each backed by different militias and tribes.
Last month the country’s rival governments in the east and west agreed to merge their competing oil companies. The agreement was hailed as a positive step and some even predicted Libya could quickly double its oil production.
According to the latest OPEC data, Libya produced 332,000 barrels oil per day in June compared to 271,000 barrels per day in May. In end 2015, the country produced 401,000 barrels per day.
Libyan production has languished all year at between 250,000 and 380,000 barrels per day, averaging just under 350,000 barrels per day year to date, and down around 50,000 barrels pre day, year over year, according to the JP Morgan analysts’ data.
Libyan oil fields rank amongst the largest in Africa, but five years of civil war and collateral damage to fields and, arguably more importantly, pipeline and port infrastructure, have taken their toll, analysts noted.
“However, recent reports suggest that restarting fields may be closer to becoming a reality now that there is a unified National Oil Company,” they said.
Nevertheless, analysts retain the cautious outlook as infrastructure problems in the country persist and threats of geopolitical risk escalation remain high.
According to the analysts’ latest forecast, Libyan oil production will reamain steady at 400,000 barrels per day during 2017.
Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS), a Washington based think tank focused on energy security, and a senior adviser to the United States Energy Security Council believes that if the political situation improves in Libya the market could see an additional 600,000 barrels a day coming online.
That scenario, as Luft told Trend, will push oil prices to the low 40s, or perhaps lower.