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Oil Prices Fall As Libya Reopens Ports

Libyan strongman General Khalifa Haftar has pledged to reopen the country’s oil ports this weekend, the U.S. embassy in the North African country said in a statement on Saturday.

“The Ambassador underscored U.S. confidence in the NOC and support for a financial model that would constitute a credible guarantee that oil and gas revenues would be managed transparently and preserved for the benefit of the Libyan people,” the statement read. “The LNA subsequently conveyed to the U.S. government the personal commitment of General Haftar to allow the full reopening of the energy sector no later than September 12.”

Groups affiliated with Haftar’s Libyan National Army blockaded the country’s oil terminals in January, suspending exports and effectively decimating production from over 1.2 million bpd to less than 100,000 bpd.

The National Oil Corporation, which is the sole entity authorized to deal with oil sales, declared force majeure on exports soon after. In July, the force majeure was lifted for a couple of days before the LNA reinstalled the blockade. In the meantime, the group has been fighting the UN-backed Government of National Accord for full control of Libya.

Last month, however, the LNA agreed to reopen the terminals for a while, to empty storage tanks full of crude oil and condensate and export them, leaving some for domestic use in parts of Libya that suffered blackouts because of a shortage of fuel for their power plants.

The move preceded the agreement of a ceasefire between the warring factions that sparked hopes the oil ports could be re-opened if the ceasefire held. This will give OPEC a headache, however. The cartel has been banking on Libya’s involuntary contribution to its production cut efforts. If the ports are reopened, so will be the fields and production could start rising, which will immediately affect prices, already embattled by forecasts of slow and only partial demand recovery.

By Irina Slav for Oilprice.com

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