Libya Decision to Resume Oil Exports Represents Unique Market Opportunity

Libya’s decision to resume oil exports at a time when tensions between Israel and Iran are at an all-time high represents a unique market opportunity for Libya, Dryad Global stated in its latest maritime security threat advisory (MSTA), which was released late Monday.

“The oil market, already jittery due to geopolitical risks, could see a significant price surge if Israeli strikes impact Iran’s oil production or disrupt the Strait of Hormuz,” the MSTA noted.

“Libya’s resumption of oil exports, which had previously been halted due to internal political disputes, coincides with a period when global oil prices may rise due to concerns about supply disruptions,” it added.

“This resumption positions Libya to benefit from higher oil prices, potentially increasing revenue significantly,” it continued.

“However, the market’s reaction will be heavily influenced by the scale and impact of any military engagements near or on Iranian oil facilities, which could either significantly raise oil prices or cause strategic shifts in oil trade routes and consumption patterns if disruptions last long enough,” the MSTA went on to state.

Dryad warned in the MSTA that the Middle East conflict has escalated significantly, “creating a complex and volatile situation”.

“The conflict has spread to several fronts, including Lebanon, Yemen, Syria, and Iraq, with Iran’s direct missile attack on Israel signaling a willingness to engage more openly,” it noted.

“The involvement of Hezbollah, the Houthis, and other proxy groups has escalated the conflict, putting Israel’s military and political strategies to the test,” it said.

In a report sent to Rigzone on October 3, Bloomberg Intelligence analysts noted that the feud between rival eastern and western governments in Libya for control of the central bank had curbed the country’s crude output by more than 500,000 barrels a day.

The analysts highlighted in the report that this output level was “half of the production before the standoff, and 0.5 percent of global supply”. They also pointed out in that report that “an agreement to appoint a new central bank governor may now end the blockade”.

In a report sent to Rigzone on October 4, Bjarne Schieldrop, the Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), highlighted that Libya was “set to revive production in the coming days”.

“Its production tumbled to less than 450,000 barrels per day in August and averaged 600,000 barrels per day in September,” Schieldrop said in the report.

“It will likely return back to around 1.2 million barrels per day rather quickly as internal political disagreements have been ironed out for now,” he added.

In the report, Schieldrop outlined that the oil market was “on edge awaiting Israel’s next move against Iran”.

He warned in the report that, if all of Iran’s oil export capacity was to be taken out, then the world would lose around 1.7 million barrels per day of Iranian crude oil exports, as well as 0.5 million barrels per day of condensate exports.

“OPEC+ now holds a spare capacity of 5-6 million barrels per day with Saudi Arabia alone able to lift production by 2-3 million barrels per day,” he said in the report.

“UAE, Iraq and Kuwait can probably lift production by 1.5 to 2.0 million barrels per day and Russia by 1.0 million barrels per day, so [the] world would not go dry for oil even if Iran’s oil exports are fully taken out,” he added.

“But spare capacity would be much lower and that would lift the oil price higher. But if Iran’s exports were taken out then we are talking full turmoil around the Strait of Hormuz,” he continued.

“And the oil price would jump considerably and above $100 per barrel as the risk of further escalation which might impact exports out of the Strait of Hormuz which carries close to 20 percent of all oil consumed in the world,” he went on to state.

To contact the author, email andreas.exarheas@rigzone.com