The Iraqi and Libyan governments said they would help Egypt cope with its economic crisis by offering up crude oil exports. The Egyptian government of President Mohamed Morsi is trying to right the economic ship more than two years after the country's revolution. Conflict in Libya and Iraq, meanwhile, has raised questions about their ability to make post-war oil gains. With OPEC members forced to make adjustments to U.S. oil production gains, it may be that retraction isn't just an economic issue anymore.
The Egyptian government is trying to secure a $4.8 billion loan from the International Monetary Fund. The country's foreign reserves have plummeted in the years since the revolution, leaving the government short on funds needed to pay for everything from food to fuel. The government this week said it would get some relief on the energy front, however, with crude oil promises from Iraq and Libya. Last month, the Libyans said they would give Egypt about $1.2 billion worth of crude on credit. In March, the Iraqi government said it would supply it with about 4 million barrels of oil per month.
Libyan oil production is holding steady at a post-war rate of around 1.4 million barrels per day. Civil war in 2011 cut Libya out of the picture. Depsite recent gains, the U.S., British and French governments expressed concern this week that government affairs were falling victim to "armed intimidation" after militias occupied several ministerial buildings. In terms of exports to the United States, a top global consumer, Libya delivered a mere 6,000 bpd in January and nothing in February, the last date for which data is available.
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Iraq may be another story, however. Its pledge to Egypt suggests it has oil to spare, at least on paper. U.S. export figures support that assertion, with crude oil deliveries up more than 25 percent from January to February. Recent talks between the semiautonomous Kurdish government and the central government in Baghdad aim to kick start oil exports stymied by lingering political issues. More than 10 years of political bickering, however, suggests any major breakthroughs are a long way off.
In Egypt, meanwhile, investors expressed confidence with a decision by the Morsi administration to appoint new Cabinet ministers, including for the Petroleum and Finance Ministries. That helped with market sentiment, but did little to allay broader concerns. Some of the new ministers are from the Muslim Brotherhood, causing Morsi's critics to complain of more of the same. For the IMF, it's not expected to do much to change the larger picture of political frustration seen by lenders.
OPEC members said they may have to start looking around for new customers now that U.S. oil production is expected to top 7 million barrels by the end of this year. Nigerian energy officials said this week from Houston they were packing up shop and taking their crude oil to Asia. OPEC is adjusting to lower demand for its crude oil from the United States at the same time that its own members are increasingly the subject of international concern. For oil markets, the geopolitical turmoil that grew out of the Arab Spring shows retraction could translate to a retreat from the global stage for many coping with the "birth pangs" of revolution.
By. Daniel Graeber of Oilprice.com
