Libya's largest oilfield was fully halted amid protests on Friday as tensions in the restive African OPEC producer returned and are set to reduce global oil supply at a time when Saudi Arabia is cutting production by 1 million barrels per day (bpd) and Russia has promised a 500,000-bpd cut to exports in August.
Sharara, Libya's largest oilfield, began shutting down late on Thursday. By Friday, the oilfield was fully halted, Libya's Oil Minister Mohamed Oun confirmed via text message to Bloomberg.
The El Feel oilfield close to Sharara was also affected and was also stopped. Combined, the Sharara and El Feel oilfields in southwestern Libya pumped around 350,000 bpd of crude oil before the stoppage.
The halting of production at the fields was the result of protests of the Zawi tribe over the kidnapping of Faraj Bumatari, a former finance minister.
Since the end of August 2022, Libya has been pumping close to or even above 1.2 million bpd, the level last seen before the port blockades that began in the spring of 2022 crippled Libyan oil output in the spring and most of the summer of 2022.
Libya is exempted from the OPEC+ agreement because of its volatile security situation in recent years.
Tensions resurfaced last week, when the leader of the Libyan National Army, General Khalifa Haftar, threatened to use force unless the country's political leaders agreed on a way to distribute oil revenues fairly. Haftar's threat followed a similar threat issued by the eastern government late last month.
The stoppage of oilfields in Libya, an outage in fellow African OPEC member Nigeria, and the announced cuts by Saudi Arabia and Russia have all shifted the focus of the market to supply disruptions this week. Since breaking above $80 per barrel earlier this week, Brent Crude prices have held above that threshold, for the first time since May.
"Temporary output disruptions, like those currently in Libya and Nigeria, could further lift prices in the short term as potential tightness in the market on the back of cuts and economic resilience boost demand," Craig Erlam, senior market analyst at OANDA, said on Friday.
"The price has risen more than 13% from the lows on 28 June and, despite appearing to struggle at times yesterday, still has plenty of momentum," Erlam added.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More