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Instability In Libya Continues To Be A Drag On Oil Prices

By Daniel J. Graeber | Thu, 24 April 2014 22:10 | 1

The price for the U.S. crude oil benchmark has moved closer to $102 per barrel in trading in part because of renewed concerns over Libya, once one of North Africa's top exporters.

On concerns Libya has not yet broken rebels’ grip on oil export terminals, West Texas Intermediate was trading at $101.40 per barrel, while the price for Brent moved at $109.10.

Though U.S. crude oil levels may provide some relief to market worries, the protracted stalemate over Libyan crude, coupled with continued unrest in Ukraine, could push oil prices higher through this summer.

In early April, the government in Tripoli brokered a deal with rebel authorities in the eastern region of Cyrenaica that was expected to end a long blockade at key oil export terminals.

U.S. Navy SEALs responded earlier this year when a North Korean-flagged vessel, Morning Glory, left an eastern Libyan port with an illicit cargo of crude oil.

When Tripoli announced the rebel agreement, the U.S. government issued a statement alongside its European partners describing it as a "significant" step toward ending a stalemate that has handicapped Libya's oil sector since at least last summer.

Visiting U.S. Deputy Secretary of State William Burns said April 24 that a weak central government and pressure from rebel groups was presenting "enormous" challenges to a country still struggling to regain its footing after the fall of Moammar Gadhafi's government in 2011.

Related Article: Libya & Egypt Energy Advisory

That year, unrest in Libya prompted the International Energy Agency to call for a release of strategic petroleum reserves. Nearly three years on, Libyan output has yet to hold at its pre-war level of around 1.4 million barrels of oil per day. It is currently only producing about 220,000 barrels per day because of internal conflicts.

Russian energy company Tatneft said it's been working on getting staff into Tripoli and resume supplier negotiations with the aim of restarting work in Libya later this year. Last month, Italian energy company Eni said it was operating at about 80 percent capacity. Its chief executive, Paolo Scaroni, said his company was managing a difficult situation in Libya "reasonably well."

Libyan Justice Minister Salah al-Merghani, however, said there were technical delays in opening the eastern Zueitina oil terminal. The key terminals at Ras Lanuf and Es Sider, he added, can't open until damage at Zueitina has been fixed.

By Daniel J. Graeber of Oilprice.com

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  • nemteck on April 27 2014 said:
    You must be a bit confused.
    Title: Instability In Libya Continues To Drag Down Crude Oil Prices

    Text: "....crude oil benchmark has moved closer to $102 per barrel in trading in part because of renewed concerns over Libya"

    Of course the Libya problem INCREASES the oil price.

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