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Saudi Air Strikes on Yemeni Oil Port; ISIS Attacks Libyan Oil Port

Saudi Arabia launched airstrikes on targets in Yemen on Thursday, killing nine people and destroying trucks that deliver petroleum products for domestic consumption.

Related: OPEC Still Sees Oil Markets Balancing This Year

The strikes hit the Ras Isa port, Yemen’s main oil export terminal. But the terminal has not exported any oil since Saudi Arabia started a war nearly a year ago to fight Houthi rebels.

Separately, ISIS militants once again attacked key oil infrastructure in Libya. The Ras Lanuf port on the Mediterranean Coast, one of Libya’s largest oil export terminals, was the target of yet another attack by ISIS this week. Earlier this month, ISIS attacked and set fire to seven oil storage tanks at the port. Early reports say that the latest attacks have also resulted in huge plumes of black smoke emanating from the port.

Related: Oil Prices Approach $26 After Bearish IEA Report

ISIS also targeted oil pipelines that travel from the Amal oilfield to the port of Es Sider, which is located near Ras Lanuf. ISIS, at this point, does not have the manpower to take over large swathes of territory in Libya in the same way that it has done in Iraq and Syria. But the group is hoping to sow chaos in Libya and prevent the rival government factions from establishing control in the country.

Libya’s oil production is down to about 400,000 barrels per day, which is only about one-quarter of the country’s capacity. Before the civil war and the downfall of former dictator Muammar Qaddafi, Libya was producing 1.6 million barrels per day.

Related: Will OPEC Be Forced To Call An Emergency Meeting Soon?

The ports of Ras Lanuf and Es Sider have been offline since late 2014. Libya’s ability to ramp up production and oil exports largely hinges on maintaining security at these ports and getting them back into operation. But before that can happen, the rival governments in the eastern and western parts of the country will need to reach a political accord and some sort of power-sharing agreement.

For now, Libya’s oil output will remain low. But there is a chance that at some point it will be able to bring capacity back to the oil markets.

By Charles Kennedy of Oilprice.com

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  • Leonard on January 22 2016 said:
    It's a war! Not with guns, but with economics. Oil can be produced in Saudi at $7 per barrel. No other country can compete. Driving out of business the over $7 per barrel investors is the target of winning the war. When you have no army to fight, as Obama seems to be throwing Saudi under the bus, you fight with whatever assets you have. And, with Saudi, the asset is cheap oil.

    So, what will be the result of this oversupply of cheap production Saudi oil? Probably by the end of 2016 will be that rigs operating in the US will be down to the economic minimum, and since Russia is also on the other side of the fence with Saudi, they will be hurt similarly to the US, and considering oil production decreases by all profit making oil supply countries, Saudi wins hands down.

    Iran will also be hurt, as a distinct enemy of Saudi, as they will try to produce at present cost levels, certainly way above $7 per barrel with their now obsolete equipment.

    So, Saudi will win the economic war, and they will probably have 10 years of oil price control, similar to, but not exactly like they had with OPEC! Just watch the oil producing countries start to pay real homage to the Saudis. They won't be able to bow low enough.

    The US can fight this battle probably better than most oil producing countries. We have an ability to encourage rigs to operate, by tax reductions, and by opening up government land for production at low leases costs, and with our proven reserves, we can keep up. But, will we be able to support our allies who will fall by the wayside during this war? Wait and see who turns coat!!!!

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