Eurasia Press & News
The crisis in Libya began in August 2024, with ongoing efforts by various factions to gain control of the Central Bank of Libya (CBL) posing a clear and present danger to the country. The crisis over the control of the CBL has resulted in the closure of 60% of Libya’s oil production. This closure has halted some 700,000 barrels a day of production, with further shutdowns imminent, leading to an immediate spike of 7% in global oil prices.
In response, Eastern factions declared a complete halt to oil production. Crude oil prices rose after the Eastern Libyan government announced the closure of all oil fields in August. This decision followed the crisis involving the Central Bank Governor and the subsequent suspension of production and exports. Oil prices increased by 3%, influenced by reports of “almost complete” oil production in Libya. These reports heightened concerns that the escalation of the Middle East situation could disrupt the region’s oil supplies.
Millions of Libyans rely on the CBL to ensure the payment of their salaries and the letters of credit essential to providing them billions of dollars a year. The United Nations Support Mission in Libya (UNSMIL) is warning that the situation is critical. The Libyan government, led by Osama Hamad, also announced the suspension of oil production and exports from all fields in the country until further notice. However, the National Oil Corporation, which oversees oil resources and sector activities, did not confirm this. In a video statement posted on social media, Hamad explained that the decision was made “in response to attacks on leaders and employees of the Central Bank of Libya by outlaw groups, incited and assisted by the Presidential Council.” The Government of National Unity in Tripoli, headed by Abdul Hamid Dbeibeh, has not commented, nor has the National Oil Corporation, based in the capital, issued any statements.
The resumption of Libyan crude oil production had previously led to a surplus of crude supplies in Europe, forcing competing sellers to cut their prices. This crisis caused the OPEC member’s exports to fall to a four-year low. The National Oil Corporation (NOC) provides some 97% of Libya’s export earnings, pumping roughly 1.2 million barrels a day of oil to generate $20 billion-25 billion.
The resumption of Libyan crude oil production came after a political crisis over the central bank led to a surplus of crude supplies in Europe, forcing competing sellers to cut their prices, and the crisis caused the OPEC member’s exports to fall to a four-year low.
Libya’s National Oil Corporation announced the resumption of production on October 3, 2024, after a new central bank governor was appointed. By October 13, production was at about 1.3 million barrels per day, close to pre-crisis levels.
Data from a shipping agent showed that Libyan crude oil exports reached about 550,000 barrels per day in the first week of August, a three-fold increase from the previous week before the crisis, and this comes as Libya, a member of the Organization of the Petroleum Exporting Countries (OPEC), remains amid a political crisis that has hampered oil production.
The National Oil Corporation, which manages Libya’s fossil fuel resources, has not declared force on all port loadings and has so far opted to use the measure on specific shipments.
The corporation reported crude production at the El Feel oilfield on September 2 and exports from the Sharara field on August 7, before the crisis over the central bank’s leadership erupted. The corporation confirmed on August 28 that oil production had fallen by more than half from normal levels to around 590,000 barrels per day, but did not provide any new production figures. The timing of Libya’s increased oil production coincides with maintenance at European refineries and the full or partial closure of several refineries in the Mediterranean and northwestern Europe. This is weakening the prices of competing crudes.
According to data from the London Stock Exchange (LSEG), the premium of Azerbaijan Light crude to benchmark Brent crude fell to $1.55 a barrel, its lowest since April. The spreads between other major Mediterranean crudes — Caspian Pipeline Consortium (CPC) Blend, Saharan Blend, and Libya’s Es Sider Blend — also narrowed in the first 11 days of October.
These Mediterranean grades will face further downward pressure from the second-largest field supplying the CPC Blend, Kashagan, which returns from a full maintenance shutdown after November 10, 2024.
Global oil prices surged to their highest levels abruptly due to the suspension of more than half of the country’s oil production, equivalent to 700,000 barrels per day. This occurred after a dispute erupted between the eastern and western governments of the country over the central bank, the sole authority authorized to manage oil revenues.
Libya incurred a loss of $120 million in just three days as oil exports remained suspended from major ports and production levels stayed low across the country, despite some increased supplies for local power generation.
The Libyan National Oil Corporation announced the resumption of production on October 3 following the appointment of a new governor for the central bank. By October 13, production had reached approximately 1.3 million barrels per day, approaching pre-crisis levels.
During a meeting with the Chairman of the Management Committee of the Libyan National Oil Corporation, Farhat Bengdara, the Prime Minister instructed support for the private oil sector to boost production and enhance the efficiency of Libyan workers. The state-owned National Oil Corporation aims to increase production to 2 million barrels per day, with the current daily output standing at 1,250,775 barrels.
Oil and gas exports serve as Libya’s primary source of income, but the sector has faced challenges in recent years due to internal conflicts and political instability.
Libya’s production has seen an increase due to maintenance work at European refineries, with several facilities in the Mediterranean and northwestern Europe either fully or partially closed. The crisis at the Libyan Central Bank commenced in late August, resulting in the shutdown of numerous oil fields and ports. Libyan crude oil exports dropped to approximately 550,000 barrels per day, marking their lowest level in four years and half the July average. However, October exports have since rebounded to over 600,000 barrels per day.
Refineries have already made alternate arrangements to procure other crudes, anticipating a continued disruption in Libyan supplies. While European refineries will continue to receive Libyan shipments, they are in a position to negotiate significant discounts. Italy stands as the largest buyer of Libyan crude, accounting for a third of total Libyan exports in 2023.
