The Strategist

Libya can inflate oil prices to $ 100 per barrel


05/01/2018 - 06:01



Illness of General Haftar will certainly result in aggravation of the political situation in Libya and disruptions in oil production. This, in turn will provoke a new sharp jump in the oil prices.



RonnyK via pixabay
RonnyK via pixabay
Even the most ardent opponents of Khalifa Haftar – there is enough of them in Libya - have to admit that without him the country will once again plunge into chaos and that civil war will break out with renewed force. It is not surprising that unexpected disappearance of the Libyan National Army (LNA) commander, who controls the east of the country and is supported by Russia, Egypt and the UAE, caused alarm not only in Libya itself, but also in neighboring countries. It is believed that the general suffered a stroke and is now being treated in Paris. Moreover, Haftar's state is so severe that his return to politics is a big question.

The first signs of aggravation of the struggle for power are already evident. Yesterday, convoy of Khaftar's deputy, Abdel-Razeq Nathouri, was attacked in Benghazi. The general himself remained alive, but there were casualties among the persons accompanying him.

Not only politicians are closely watching health of Khalifa Haftar. Libya is the main oil-producing country in the north of Africa. Therefore, its political and economic stability is very important for OPEC.

The return of political instability, of course, will have an extremely negative impact on the work of the oil sector, which still gives the lion's share of Libya's exports. Haftar with his troops controls the main oil fields of Libya. Moreover, LNA with its allies controls not only the extraction of oil and gas, but also oil terminals in the four largest ports of the country, i.e. export of oil.

Experts agree that General Haftar's control over the Libyan oil industry helped oil workers raise oil production from 300,000-500,000 barrels per day to the current 1 million barrels per day. The struggle for power will not only lead to interruptions and, eventually, a fall in the extraction. Export, and therefore money coming into the country, will also be reduced. According to the most optimistic scenario, aggravation of the domestic political situation in eastern Libya will reduce oil production by at least 200 thousand bpd. Given the current balance of supply and demand in world markets, this will lead to a further rise in oil prices. On the one hand, this is what all the oil-producing countries are achieving, but it is very important that the price increase occurs slowly and evenly, without jumps. In the situation with Libya, a sharp jump is very likely. The danger is it may lead to a situation similar to that four years ago, which ended in a collapse in oil prices almost fourfold.

However, even if the situation in Libya can be kept under control, which seems quite problematic, oil prices will still continue to rise. The reason lies in the situation surrounding the nuclear deal with Iran, which may be resolved in May. Bulls will, of course, be pleased with the rapid rise in oil prices thanks to Tripoli and Tehran to $ 100 per barrel. In the long term, high oil prices will lead to an increase in production not only of US shale oil producers but also of non-OPEC oil-producing countries that have not signed OPEC + agreement and can easily do so. So the price rise to $ 100, at least as fast as it is likely to be due to Libya and Iran, does not suit even Saudi Arabia, which aspires to maximize the oil price on the eve of Aramco's IPO.

source: oilprice.com




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