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Libyan oil is still suffering disruption in production and marketing
There are too many risk factors at play to express any sense of real optimism about a full market return for Libya’s oil, the Royal Bank of Canada said.
In a weekend statement, the U.S. government said it was concerned by mounting violence in Libya, where rival factions had taken control over some government buildings in Tripoli. Libya is struggling to return to economic life after years of civil war.
Total crude oil production last month from Libya, reported to the Organization of Petroleum Exporting Countries by secondary sources, was 34 percent higher than August, but at 363,000 barrels per day, was still about 20 percent less than the average for last year and far below the pre-war level above 1 million bpd.
The slight rebound for Libya has been used as a case-in-point by analysts expecting a rebound in total oil production even as members of the Organization of Petroleum Exporting Countries discuss freezing output levels.
Helima Croft, the head of commodity strategy at RBC, said the outlook for Libya, however, was muddied at best. She said Libya faces a number of hurdles to even making its current rates of production sustainable.
“Libya represents a bearish red herring for the oil market versus some market expectations, and current production levels likely represent a near-term high water-mark in our view,” she said in an emailed research note.
The World Bank said in a recent report on the economies in the Middle East and North Africa that lower oil prices were creating headwinds. Four states that to a varying degree rely on oil for export revenue — Iraq, Libya, Syria and Yemen — are mired in conflict, which is inhibiting the potential for economic growth.
Libya said its crude oil production could climb to as high as 900,000 bpd the end of the year as export terminals reopen and draw on output from nearby fields. With various degrees of conflict and political movements in the country, RBC said most of the recent surge was likely the result of companies taking advantage of “low-hanging fruit.”
“Nothing is straightforward in Libya and recent events in the country show that the ground is constantly shifting,” Croft said.
