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Not so Fast on Libyan Oil Optimism

By Joao Peixe | Sat, 18 January 2014 00:29 | 0

We may be seeing the first boost in Libyan oil production in 10 months, which the markets are eyeing hungrily, but don’t jump the gun on this one—Libya’s oil is still being held hostage to a chaotic power struggle.

Libya tripled its light crude oil supplies to around 650,000 barrels a day over the past three weeks, but while the government remains publicly optimistic that its closed eastern ports held by rebels will be reopened this month, there is little evidence to sustain that.

Some of the optimism stems for the resumption of output on 4 January of Libya’s second-largest field, Sharara, but keeping it open means negotiating with protesters who have threatened to shut production down again if their demands are not met in terms of more national rights for the Tuareg tribe.

In December, Libya was putting out only about 210,000 barrels per day, so by comparison, the figures look great if the jump can be sustained.

Related article: The Volatile Middle East; Oil and Turmoil

Before civil war erupted in 2011, Libya was producing more than 1.65 million barrels of oil per day. November and December production of 210,000 bpd was its lowest level since the rebellion and exports are a meager 110,000 bpd from the few terminals still under the government's control.

Tribes pressing for more autonomy in eastern Libya are seeking a return to an administrative system established in the 1950s, which divided the country into three states -- Cyrenaica, Fezzan and Tripolitania. Last month, the self-declared government of Cyrenaica said it established its own oil company ready to put crude oil on the international market.

And problems at the eastern ports subsist, with three ports—Ras Lanuf, Es Sider and Zueitina—still under “rebel” control, or more to the point, under the control of Cyrenaica. Combined, they used to handle 600,000 barrels per day of the country’s crude exports.  

In the meantime, these rebel groups have tried to step out on their own more forcefully, trying to export oil unilaterally, prompting the government to issue a warning to anyone who attempts to take oil from these ports without the government’s approval.

So while European refiners particularly are eyeing the change to recoup profits here, the rebound may be very fleeting at best.

By. Joao Peixe of Oilprice.com

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