Ten oil tankers capable of carrying some 8 million barrels of oil are idling near some of Libya’s oil export terminals, tanker-tracking data monitored by Bloomberg showed on Thursday, as the Libyan port blockade entered an ugly sixth day.
Groups loyal to eastern strongman General Khalifa Haftar blocked virtually all exports from the African oil producer, and when storage reaches maximum capacity, it will result in a complete loss of all of Libya’s 1.2 million barrels per day of oil production and exports.
“Shutdown of all affected oil fields will result in a loss of crude oil production of 1.2 million b/d and daily financial losses of approximately $77 million,” Libya’s National Oil Corporation (NOC) said on Monday, confirming that nearly all of the OPEC member’s production will be lost due to the blockade.
This is the largest outage on the oil market since the September attacks on Saudi Arabia’s oil facilities, yet it has failed to move oil prices higher.
Market participants are largely ignoring the Libyan outage and are focused on the prospects of global oil demand growth this year and the pace of supply increase from non-OPEC producers, primarily the United States, Brazil, Guyana, and Norway.
In addition, the new fear on the market, the outbreak of a coronavirus in China, could cut oil demand and push oil prices down by nearly $3 a barrel, Goldman Sachs said earlier this week.
“However while markets are obsessing over virus developments, they seem to be ignoring a number of oil supply risks in the market, which in aggregate would far outweigh the demand impact from the Wuhan virus,” ING strategists said on Thursday.
According to ING’s estimates, the current outages around the world sum up to around 1.4 million bpd, “which would be more than enough to shift the global market into deficit over 1H20,” said Warren Patterson, ING’s Head of Commodities Strategy and Senior Commodities Strategist Wenyu Yao.
“While the market may shrug at supply losses from Libya, it would be more difficult for the market to ignore large Iraqi supply losses if they became a reality, as Iraq is OPEC’s second-largest producer,” they noted.