Libya has been one of the biggest x-factors in the global crude markets the past year. With on-again, off-again production in this key nation alternately supporting and suppressing prices.
But news this week suggests things are looking up for Libya’s crude output.
And down for global oil markets.
Reuters reported that Libya’s National Oil Company has struck a backroom deal with German energy developer Wintershall, which will see that firm restart a major chunk of oil production in the east of the country.
The Wintershall assets covered by the deal have production potential of 160,000 b/d. But have been shut-in since earlier this year after a dispute broke out between the company and the Libyan government over an alleged $900 million in unpaid taxes.
The two parties however, said Tuesday they have reached an “interim arrangement” to end the dispute. Opening the door for Wintershall’s significant swath of production to return to market.
That would be a big happening for Libya’s overall oil output. The country is currently producing an estimated 830,000 b/d — meaning a return of the Wintershall fields would lift national production by nearly 20 percent overnight.
Such a rise would continue an upward trend in Libya’s production the last few months. With production having been as low as 700,000 b/d as recently as March.
Libyan officials said they are indeed targeting production of 1 million barrels per day by the end of July. Meaning the crude market might have a lot more supply coming over the next six weeks.
All of which is critical for global crude prices. With Libya being exempted from OPEC production quotas — and thus one of the few nations on Earth free right now to ramp up output and exports.
Stats this week in fact showed that Libya’s rise the last few months is having a notable effect on supply. With OPEC’s production for May coming in 336,000 barrels higher than the previous month — at 32.1 million barrels per day.
Much of that rise was due to Libya’s surging output — with contributions from Iraq and Nigeria. Watch to see if Libyan production continues to lift overall supply, which could further dampen recently-falling oil prices.
Here’s to the odd man out.