Libya said it would resume full oil production from Thursday in a move that should return about 700,000 barrels a day of crude to the global market following the resolution of a dispute between rival political factions in the country, Report informs via The Financial Times.
Previous orders to halt operations have been lifted at “all Libyan crude oilfields and terminals”, the National Oil Corporation said in a statement on Thursday.
Libya normally pumps about 1.2 million barrels of crude a day but output has fallen to less than 450,000 b/d since the government in control of the east of the country shut down production and exports in August in a fight over control of the central bank.
The resumption of full production from Libya will help allay some of the concerns in the market over the potential for the escalating conflict in the Middle East to disrupt oil supply from Iran and other producers in the Gulf.
Global oil prices had risen sharply since the start of the week amid the continuing tensions in the region, leading to Iran’s missile attack on Israel on Wednesday. But the market had pared its gains as traders assessed whether the escalating conflict would disrupt energy supplies.
Weak demand from China as well as the fact that Opec+ producers are sitting on more than 5mn b/d of spare capacity, which could be brought back if Iranian supply was suddenly disrupted, had weighed on the market.
But while the resumption of Libyan production is “expected, so should be largely priced in”, the volumes coming back “doesn’t offset what could potentially be at risk in the Middle East”, said Amrita Sen, director of research at Energy Aspects.
The consultancy calculates that the resumption will add 600,000 b/d to the market.
Brent crude, the international benchmark, fell roughly 0.5 percent shortly after the announcement to trade at around $75.29 per barrel. West Texas Intermediate, the US equivalent, dropped a similar amount to $71.52 per barrel.
But both indices soon rebounded, with Brent surging to $77.40 per barrel, its highest level in a month.
The reduced production followed a political stand-off between Tripoli-based Prime Minister Abdul Hamid Dbeibeh and the rival administration in the east dominated by warlord Khalifa Haftar.
Dbeibeh had pushed for the ousting of Libya’s central bank governor Sadiq al-Kabir, who was backed by the east-based parliament and Haftar.
In response to the moves to oust Kabir, the eastern administration — which is not internationally recognized — shut down large parts of the country’s production and exports. Almost all of the country’s oilfields are in the east.
The central bank holds billions of dollars in oil revenue, Libya’s only source of income.
The country has been divided since 2014 in the chaos that ensued after the 2011 Nato-backed uprising that toppled Muammar Gaddafi. The dueling administrations in late September agreed on the appointment of a new central bank governor, paving the way for the lifting of the blockade.