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Libyan crude oil

Hydrocarbon Engineering,

Since the end of July this year, Libya’s oil sector has been deeply impacted by prolonged strikes at key ports, which has removed more than 1 million bpd of crude oil from the global market. The supply disruptions have affected the Brent price of crude oil as the outages reinforced a tighter market by increasing global supply disruptions and decreasing surplus crude oil production capacity. Since August, when the initial shock was overcome, the global oil market adjusted and supplies of crude from other countries made up the loss from Libya. Yet, there are still several other factors that have more recently influenced the Brent price.

Over July and August, strikes led by the Petroleum Facilities Guard at major oil loading ports in the eastern half of the country, a complete or partial shut in of oilfields linked to those ports was forces. At the end of August, unrest moved to western parts of the country as the Zintan militia blocked pipelines transporting crude oil from two of the largest fields in the west, again forcing fields to shut. In mid September production restarted, but in October El Sharara was forced to shutdown again due to demonstrations by the Tuaref community.

Crude oil prices
From the end of July to the end of August this year, crude oil supply outages in Libya more than doubled while the Brent crude oil price rose by more than US$ 9 /bbl. In the second half of September, Brent decreased by an average of only US$ 5 /bbl as some production restarted. Despite the continued recent difficulties in Libya, crude oil prices have fallen recently, reflecting the role of other market influences, including production in Saudi Arabia, seasonal demand due to refinery outages and maintenance and slower global economic growth.

Oil supply
During August, unplanned global supply disruptions reached 3 million bpd which is the highest level since January 2011 and remained at the same level through November. From August to November 22nd, Libya accounted for on average 39% of total global supply disruptions. These disruptions have come at the same time as other outages particularly among OPEC member countries.

Other factors
During August of this year, European refiners reduced crude oil processing based on weak profit margins and planned maintenance. Typically, the majority of Libya’s crude oil is old to European refiners, and this figure hit 70% in 2012. The recent Libyan disruptions started at the same time as the European problems which did ease the scramble to substitute the lost barrels from Libya.

Non-OPEC crude oil and liquid fuel supplies increased by 1.2 million bpd in the first half of 2013 compared to the same time last year. Growth during the first half of this year is more than double the increase in non-OPEC supply in the first half of 2012. The robust growth of non-OPEC supplies this year is largely due to North American production growth from onshore tight oil formations and from the Canadian oilsands. Year on year increases in non-OPEC supply did soften the impact of heightened Libyan outages on crude oil prices, particularly when compared to the Libyan civil war in 2011.

Adapted from press release by Claira Lloyd

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