By Adedapo Adesanya
Oil prices rose on Monday as violence in oil producing African country, Libya, pushed demand on fear of disruption to supply.
In the tension-charged country, two large crude production bases began shutting down due to a military blockade that will show a drop to oil production from the country.
As a result, Brent crude was up 33 cents or 0.51 percent to $65.18 per barrel while the US West Texas Intermediate (WTI) crude rose by 0.84 percent or 49 cents, to settle at $59.07 per barrel on Monday night.
According to reports, supporters of military commander, Khalifa Haftar, closed a pipeline connecting Libya’s largest oilfield and another major production base. This military blockade prompted both oilfields to stop production, Libya’s National Oil Corporation (NOC) said on Sunday.
And with the halt to production fields – the Sharara and El Feel, almost all the country’s oil output will be offline. Libya’s biggest oilfield, El-Shahara, can produce up to 320,000 barrels of oil per day, while the El-Feel, the other oilfield being shut, is 70,000 barrels. This means almost 400,000 barrels will be shut down as a result but analyses say this won’t have a major effect on global supply because Libya produces 1.2 million barrels per day.
It was stated that any spare capacity can simply be absorbed by other Organization of Petroleum Exporting Countries (OPEC) members which will need to pump a little more to compensate, something that will be welcomed as an agreement holds each member accountable to a cut.
Khalifa Haftar and the recognized Libyan Prime Minister, Mr Fayez Sarraj, have been fighting for control of Libya for the past five years. Other countries that have taken a side in the civil war agreed on Sunday to respect an arms embargo and not provide military support to either side but pursue a ceasefire with international organisation like the European Union. Efforts are being done to stop the tension that had risen since 2011 with the assassination of Muammar Ghaddafi.
It was also noted that due to the Martin Luther King Jr. holiday in the United States, there wasn’t much trading.
Oil has experienced a very shaky start to the year as tension spiked early in January between the United States and Iran and initial optimism over the phase one US-China trade deal did not meet expectations amid skepticism about China’s ability to meet targets. Prices surged earlier this month after Iran retaliated for the U.S. killing of General Qassem Soleimani before returning back to losses after President Donald Trump of the US said he wasn’t going to retaliate the attacks.
Members of OPEC also continue to help prices as they reduce production by 1.7 million barrels per day, above the previous 1.2 million barrels per day while non-OPEC output is expected to climb this year, meaning that there could be risk that oil supply will rise with any spike in prices.
Modupe Gbadeyanka