Oil Prices Drop As Potential Producer Libya Restarts Production Following Years In War

Oil Prices Drop As Potential Producer Libya Restarts Production Following Years In War

By Spy Uganda

Oil prices fell on Monday on the potential return of output from Libya as rising coronavirus cases also added to worries about global demand, although a tropical storm heading for the U.S. Gulf of Mexico limited losses.

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Libya’s National Oil Corporation will restart production from certain fields and some exports of crude oil, the company said, as quoted by local media, adding that it will only restart production at “safe” fields and exports from safe ports.

“Our main concern is to start production and exports taking into account the safety of workers and operations, as well as to prevent any attempts to politicize the national oil sector, which means that the NOC is doing its technical and non-political mission to resume operations in the safe areas and technical evaluation is underway in preparation for the start of production and exports,” NOC’s chairman Mustafa Sanalla said.

The force majeure will be lifted from fields and ports that are free of the presence of paramilitary groups and mercenaries, but remain in effect for those where there are still such groups, which hamper the work of NOC, the company said.

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The head of the Libyan National Army General Khalifa Haftar, whose troops, with help from affiliated groups, blockaded Libya’s oil ports in January, announced the end of the blockade on Friday. On the same day, NOC’s Sanalla said the force majeure will be lifted from the facilities only after they are demilitarized.

Currently, oil production in Libya is just 100,000 bpd—down from 1.2 million bpd at the start of the year, just before the blockade in January.

In recent weeks, rival factions and the foreign powers supporting them have been negotiating some kind of an agreement that could lead to Libyan oil returning to the global market at a time of weak demand recovery and weak oil prices. The latest news is likely to arrest or even reverse an improvement in oil prices that followed OPEC+’s latest meeting that offered a glimmer of hope for supply, if not demand.

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But now that Libya will start bringing production back on, things may well change as the OPEC+ agreement relied on the country’s involuntary contribution to the overall supply curbs

Globally Brent crude was down 33 cents, or 0.8%, at $42.82 a barrel by 0645 GMT, while U.S. crude was down 38 cents, or 0.9%, to $40.73 a barrel.

Tropical Storm Beta was predicted to bring 1 foot (30 centimetres) of rain to parts of coastal Texas and Louisiana as the 23rd named storm of this year’s Atlantic hurricane season moves ashore on Monday night, the National Hurricane Center said.

Oil and gas producers had been restarting their offshore operations over the weekend after being disrupted by Hurricane Sally. Some 17% of U.S. Gulf of Mexico offshore oil production and nearly 13% of natural gas output went offline on Saturday in the face of Sally’s waves and winds.

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