Despite US sanctions on Iran, Venezuela’s ongoing crisis, Libya being at risk of conflict-related oil disruption and Russian oil exports curtailed by contamination problems, oil prices have weakened considerably, plummeting from close to $69/barrel May 28 to below $62/b May 31.
Saudi Arabia had promised to make up any lost barrels resulting from the US’ tough stance on sanctions, but there has been little need to do so. The OPEC kingpin produced 9.82 million b/d in April, according to third-party reports, marginally less than in March.
Fears of disruptions to Libya’s oil supplies have so far not materialized, but that doesn’t mean they should be discounted. Libya remains a flashpoint. Oil revenues are currently distributed by a combination of the National Oil Company, the only body authorized to export crude, and Libya’s central bank, both located in Tripoli, which is currently being besieged by General Khalifa Haftar’s Libyan National Army (LNA). The LNA and its allies control the bulk of oil production and distribution infrastructure.
As the military situation appears to have reached a stalemate and the battle becomes more attritional, oil revenues are likely to prove the weapon that tips the balance. In a free for all, it is by no means clear that Haftar’s alliance will hold together. NOC chief Mustafa Sanalla warned in May that 95% of the country’s oil production could be lost –…