Libya Throws One Million Barrels of Oil Into Already Oversupplied Market

Libya’s crude output has exceeded one million barrels per day since its oil industry came back online. However, the inflow may create shockwaves in the global oil market as demand has not fully recovered from the Covid-19 crisis, RT reported.

Despite facing financial difficulties, the National Oil Corporation (NOC) announced that it had managed to increase its oil production to 1,036,035 barrels per day. According to its statement released on Saturday, the current output levels may be “reduced or totally ceased” if “some entities,” which the corporation did not identify, attempt to hinder its efforts to boost production.

The milestone comes less than a month after Libya lifted force majeure on its largest deposit, the Sharara oilfield. Oil fields and ports started to reopen after Field Marshal Khalifa Haftar said in September he would lift the blockade on them following a deal with the Tripoli-based, UN-backed Government of National Accord (GNA).

Libya has Africa’s largest proven crude oil reserves, and while the increase in oil production will help the economy of the conflict-ridden country, its re-entry into the global oil market may add pressure to already depressed oil prices. Futures for West Texas Intermediate (WTI) and Brent logged some weekly gains thanks to several positive sessions, but closed much lower on Friday amid US election uncertainty and rising coronavirus cases across the globe.

WTI was down over four percent and Brent dropped by more than three percent on the last trading day this week to close at $37.14 and $39.45 per barrel respectively. The energy sector has been severely hit by the Covid-19 outbreak, which has crippled demand for oil, and new lockdowns in Europe could further choke off demand for the commodity.

Despite being a member of the Organization of the Petroleum Exporting Countries (OPEC), Libya is not subject to production cuts agreed by the group and its allies led by Russia earlier this year. Under the historic agreement, major oil producers initially decided to cut production by 9.7 million barrels per day before easing the caps in August to the current level of 7.7 million barrels per day. The one-million-strong daily barrel inflow from Libya amounts to around 13 percent of the current OPEC cuts. It is unclear whether any of its fellow oil exporters will further slash their own production to make up the difference or whether it will affect OPEC’s future decisions on production cuts.