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Breaking News:

Surprise Crude Build Threatens Oil Rally

Libya Faces Oil Disaster As Biggest Field Stops Pumping

Oil field Libya

Libya is facing a major oil crisis as a group comprising local tribesmen and members of the field’s security guard seized the largest field in the country, Sharara. Reuters reported the field had already shut down on Sunday, quoting petroleum engineers working on the site. At the time, however, The National Oil Corporation said in a statement quoted by S&P Global Platts, “The oilfield at present remains open.”

Today, however, Reuters carried a report citing a statement from NOC that said the company had declared force majeure on exports from the Sharara field.

The danger of it shutting down, however, remains serious as NOC acknowledged in its statement. "A shutdown of the Sharara field would result in a production loss of 315,000 b/d, with a knock-on effect of 73,000 b/d at El Feel due to its dependence on Sharara electricity supply," the company said, adding "Supply to the Zawiya refinery would also be affected. This would equate to a combined daily cost to the Libyan economy of $32.5 million.”

The occupation of the field comes on the heels of a rough weather spell that caused floods and shut down all four export oil terminals in Libya temporarily, slashing the country’s production. Currently, according to NOC, Libya produces crude at a daily rate of 900,000 bpd, down 300,000 bpd from last month. All export terminals have reopened but a Sharara shutdown would make this fact more or less irrelevant in light of Libya’s plans to recover production to pre-war levels, when it stood at 1.6 million bpd.

The latest bad news from Libya comes as the North African country won another exemption from the OPEC-wide production cuts that aimed to arrest and hopefully reverse an oil price decline that worried the oil-reliant economies of the cartel. So far, the decision to cut 800,000 bpd from OPEC’s daily production plus another 400,000 from Russia and several other producers has failed to have any significant effect on international prices, with the improvement possibly a lot more modest than expected by OPEC.

By Irina Slav for Oilprice.com

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