The oil market is experiencing turbulent days. After climbing more than 8% last week and recording almost 4% yesterday, crude oil is falling today, Tuesday, due to the tense calm in the Middle East, but above all due to the news which confirms that Libya once again produces more than a million barrels of oil every day. The internal conflict that maintained the African country’s major oil fields ended last week, allowing all fields to reopen relatively quickly. Thus, one of the largest crude oil producers in the world contributes, through its production, to somewhat calming the fire that the conflict between Israel and Iran has ignited in the oil market.
However, the price of oil Brent falls around 3% and the barrel It amounts to $78.7. Remember that the price of a barrel exceeded $81 on Monday due to the growing tension between Israel and Iran. The oil market is plunged into a sort of roller coaster caused by geopolitical tensions. Before the escalation of tensions in the Middle East, the price of crude oil fell to around $69 per barrel. Today, with the almost complete resumption of production in Libya and the disappointment in China due to the lack of new stimulus measures, crude oil is correcting intensely again, we will see for how long.
Libya opens the oil tap
According to industry sources in the African country, Libya’s oil production has exceeded one million barrels per day (mbd) for the first time since August. The OPEC member’s output rose to 1,067 mbd this weekend. However, production remains below the 1.18 million barrels produced in July, so there is still room for improvement in the very short term.
These production levels almost double the Libyan production of just a few days ago. In August, production fell to 500,000 barrels per day, according to figures provided by the National Petroleum Corporation, due to the closure of the country’s oil facilities. The reason for this closure was the conflict between the two “governments” of a country divided into two factions. The crisis over control of the Central Bank of Libya in August increased the risk that the country would experience a new episode of instability. The truth is that uncertainty and conflict have become Libya’s “daily bread” since the fall of Muammar Gaddafi in 2011. However, the two factions took a “kick” and reached a new agreement there. a few days ago.
The Libyan problem remains unsolved
To better understand the situation, it is interesting to analyze the current situation in Libya. The country is currently divided between two rival administrations.: the Government of National Unity (GNU) of Abdelhamid Dabeiba, recognized by the international community and established in Tripoli (west); and the Executive of Benghazi (east), elected by Parliament and led by Osama Hamad and under the supervision of Marshal Hafter. Struggles for control of the country have repeatedly led to the closure of oil fields.
Representatives of Libya’s rival administrations agreed on September 26 to appoint a new governor, Naji Issa, resolving the impasse over a post that effectively grants control of billions of dollars in energy revenue.
Libya is one of Africa’s largest crude oil producers. Depending on the month, this country even becomes the leading producer on the continent. Libya has proven reserves of just under 50 billion barrels of crude oil (i.e. they are cost effective and can be mined with existing technology). The continent’s oil production is around 8.4 million barrels per day, making Libyan production essential for both Africa and the world. It is therefore of vital importance that the agreement reached is as durable as possible.
However, analysts believe that the September 26 agreement, like previous Libyan agreements, rests on fragile foundations. A United Nations-backed ceasefire in 2020 succeeded in ending the fighting, but has yet to bring the country to national elections or resolve the long-standing divide between East and West. Despite all this, oil will sooner or later be used again by certain factions as a “throwing weapon”.
