It’s been a tough couple of weeks for oil investors. With crude prices having descended back to near $40 per barrel, after making a run close to $50 in mid-August.
And news over the weekend suggests things could get worse before they get better.
That’s because of developments in one oil-exporting nation that’s been almost wiped from the market recently: Libya. A place that has seen its crude exports drop to almost nothing since the deposition of dictator Muammar Gaddafi in 2011.
But Libya’s central government is intent on regaining its share of the global oil market. With officials here saying Saturday that they will refuse to freeze output until national production rises back to pre-Gaddafi levels.
That word came from Libya’s official envoy to OPEC, Mohamed Oun. Who told the press that Libya will oppose a production freeze being discussed by OPEC and Russia on September 26.
Mr. Oun said that Libya will not rein in production until it restores output of 1.6 million barrels per day — the level it enjoyed during Gaddafi’s time.
That leaves a lot of new oil to come to market, given that Libya is currently producing just 300,000 barrels per day. Meaning that officials want to dump another 1.3 million daily barrels on the market before they’ll even consider slowing things down.
That said, there is doubt as to whether Libya can move this crude out of country. With press reports over the weekend suggesting that the key oil ports of Sidra and Ras Lanuf were once again taken by rebel forces — delaying planned shipments of crude here.
Those ports have been the subject of intense fighting between Libya’s central government and forces loyal to eastern commanders splintered from the national army. With control going back and forth since Gaddafi was ousted in 2011.
News last week suggested that the national government had retaken the ports — with crude shipments now being readied. But the weekend’s news shows this may have been premature, and we’ll now have to wait and see if shipments can really be moved.
Watch for more news on who has the upper hand at these key facilities. If the central government does gain control and can resume exports, it could be a significant drag on international prices.