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State Dept Calls On Libya To Resolve Sharara Problem

The U.S. State Department has issued a statement urging the Libyan authorities and the militants who put a blockade on the country’s biggest oil field to resolve their differences so production could resume.

The blockade earlier this week forced the National Oil Corporation to declare force majeure on the field, which produces around 315,000 bpd. In its statement, NOC said that production from the field will resume when “alternative security arrangements are put in place.” This force majeure follows another one from last week that covered exports from the blocked field that contributes almost a third of Libya’s national total.

“The United States continues to monitor the situation at the Sharara oil field and echoes the UN Support Mission for Libya’s call for the immediate and unconditional withdrawal of armed elements in the area, which is crucial to allow oil production for the benefit of all Libyans to resume,” the State Department statement read.

The Sharara field has been shut down for over a week now, after a group of local tribesmen and militants from the Petroleum Facilities Guard took control of it and demanded what NOC called a ransom for lifting the blockade. The state oil company warned against paying, noting this would set a dangerous precedent. In fact, the company’s chairman, Mustafa Sanalla went as far as to say NOC will not restart production at Sharara if the government pays the PFG.

This is not the first and it probably won’t be the last production outage at Sharara, which contributes a significant portion of Libya’s total crude oil production. However, this is the first time the effect of this outage on international oil prices has failed to materialize.

Usually, any news of a production outage in Libya or anotSaudi Oil Minister: Crude Stocks Should Drop Very Soonher large OPEC producer would lift prices immediately but not this time. This time, prices have continued downwards, pressured by the growth in U.S. production and heavier pessimism about global economic growth next year.

By Irina Slav for Oilprice.com

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