In the most recent developments of Libya’s protracted civil war, rebels from the east of the country seized two of the country’s largest oil terminals, Zueitina and Ras Lanuf. Despite fears of an upturn in violence following the events, an agreement was reached to resume exports from the captured oil ports. The consequences are likely to be positive for Libya, as oil remains its most valuable commodity export. Globally however, concern for a glut in supply has seen Benchmark Brent crude futures fall to a two-week low of $45.52, with the resumption of Libyan exports identified as a key reason for the downturn.
Libya’s oil production had fallen to record lows since the toppling of the Gadaffi regime in 2011, as the country descended into civil war. At its peak, Libyan oil fields were producing 1.7m barrels per day, before falling to around 270,000 p/d in 2016. The seizure of Zueitina and Ras Lanuf by forces hostile to the UN-backed Tripoli government of national accord (GNA) was symbolic of the continued battle for not only control of the country’s oil production, but overall political control.
The faction responsible, General Khalifa Haftar’s Libya National Army (LNA), has gained increasing support across eastern Libya following successes against extremist forces, such as Daesh. The capture of the oil fields has been recognised as a further extension of the LNA’s power, as the incumbent GNA has been unable to stem their advance whilst caught up in their own battle with Daesh closer to the capital Tripoli. The agreement between General Haftar and the National Oil Corporation to resume exports can be seen as part of the wider struggle for Libya. As argued by International Crisis Group’s Senior Libya analyst Claudia Gazzini, General Haft could ‘potentially cast himself as the person who allowed Libya’s oil to flowagain’.
What may be good for Libya is likely to have wider consequences for global oil prices. Downward pressure on Brent crude from an increase in production in not only Libya, but also Nigeria and Iran, is already being felt on the international markets. Libyan production, if necessary repair works are completed, could rise once more to around 900,000 barrels, whilst the ExxonMobil have moved to export Qua Iboe crude from offshore sites in south-eastern Nigeria for the first time since July. It has been two years since global oil prices were last above the $100 per barrel mark, as forecasters predict oversupply will continue into the foreseeable future.