Shutdowns in Libyan Oil Fields Endanger 1.2 Million Barrels Per Day Output

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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Competing governments in oil exporter Libya have led to the shutdown of the majority of the nation's 1.2 million-barrel-per-day output, according to sources. Most of that oil goes to the export market, largely to Europe. Observers have noted that this could boost U. S.-based West Texas Intermediate (WTI) as it is seen as a possible replacement.

On Thursday, the Libyan government announced a state of high alert on all oil fields, seaports and oil companies, halting oil exports until further notice. The Benghazi government, which controls the eastern part of the country, where the oil fields are located, took the action in a dispute over leadership of the Central Bank of Libya (CBL) that was appointed this week by the western government, based in Tripoli.

As of Thursday morning, indeed, WTI October contracts were going for $76.22, up 2.13% from Wednesday's close. On that day, WTI had dropped 1% on fears regarding weak Chinese demand and broader market weakness concerns. There are also underlying concerns about ripple effects from a possible expansion of the Israel-Gaza conflict, that could also affect oil exports from Iran or elsewhere.

Effects on Refining
The nation's Rasco Refinery, which had restarted in 2023 after being down for more than a decade due to damage from the 2011 revolution, was still operating as of August 27.

This is Not the First Time
Since the UN-led overthrow of Muammar Gadafi in 2011, the nation has been in turmoil almost constantly. Various groups have shut down parts of Libya's oil fields several times, usually holding it hostage over political demands, or looking for a larger share of the oil revenues themselves.

This dispute involves the leadership of the CBL, as Reuters reports. "Eastern factions, including the House of Representatives (HoR) parliament led by speaker Aguila Saleh and the Libyan National Army (LNA) under commander Khalifa Haftar, oppose the Tripoli-based Presidency Council's bid to oust CBL governor Sadiq al-Kabir." Eastern factions want al-Kabir returned to the post he has held for 13 years.

How Long Will It Last?
A 2020 blockade instituted by the nation's eastern faction, Libyan National Army (LNA) under commander Khalifa Haftar, lasted eight months. This time, both eastern and western factions appear entrenched in their positions over the CBL, so the duration of the shutdown is uncertain.

And the larger question of how to resolve the civil war seems to have no answer, as the factions have been in conflict for about 10 years despite several solution attempts.

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