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BREAKING: Mysterious shortage in Libya may cause serious hike in oil prices

FILE - In this March 5, 2011 file photo, an anti-government rebel sits with an anti-aircraft weapon in front an oil refinery, after the capture of the oil town of Ras Lanouf, eastern Libya. Oil prices climbed to near $106 a barrel Monday as intense fighting between Libyan government forces and rebels appeared to be turning into a civil war and raised the prospect of a prolonged cut in crude exports from the OPEC nation. (AP Photo/Hussein Malla, File)

Libya was once the richest state in Africa but since NATO’s war on Libya in 2011, it has been the world’s most resource rich failed state.

Libya currently has two bodies which each claim to be the country’s legitimate government. First of all there is the General National Congress in Tripoli and then there is the government in Tobruk, near the Egyptian border. The Council of Deputies in Tobruk is generally considered the more moderate of the two.

The Tobruk government’s most important military commander is Khalifa Haftar who has the backing of Egypt, by far the most important international player in the attempt to bring some semblance of normalcy back to Libya.

The fact remains that both the Tripoli and Tobruk governments are contending with multiple groups of terrorists including ISIS, al-Qaeda and local jihadist groups in addition to local gangs of pirates and other tribal factions.

Into this fray, many are beginning to question whether Saif al-Islam Gaddafi, son of the late Libyan leader, Muammar Gaddafi could help unite the fractured state.

On top of the civil war ranging in a failed state, is a substantial amount of oil.

Unnamed sources cited by oilprice.com report a total stoppage of oil flowing from Sharara oil field, the largest in Libya.

David Forest said of the event:

As a result, sources said Libya’s overall oil production has now fallen to 560,000 barrels per day. Coming just days after Libya’s National Oil Corp. had publicly pegged the country’s production at 700,000 b/d.

That suggests the stoppage at Sharara has lowered production by 140,000 b/d — representing a 20% decline. With the shortfall happening virtually overnight, and with no apparent warning to oil traders

The sources reporting the event did not offer an explanation as to why oil from Sharara have been shut down nor why supplies have also been halted at Zawiya and Mellitah oil depots.

The crisis has put the price of Brent Crude over the crucial $50 mark.

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For Libya, this will mean that the wider business and geo-political world will be paying closer attention to the often ignored conflict  and it will also mean that other oil producing states will be watching the markets closely.

As a crucial global energy producer, Russia will be watching this closely. In January of this year, Russia reached an agreement with OPEC to cut oil output.

The rise in Brent Crude following from the mysterious cuts in Libya have all ready impacted the Russia as the Rouble continues to rise against the Dollar and Euro.

It is a shame that Petro-politics will doubtlessly play an important role in shaping whatever happens next in the Libyan failed state. Russia has a keen interest in restoring order back to Libya, but this monumental task is first and foremost dependant on Egypt as Libya’s most important neighbour and historic ally.

As Syria slowly but surely wins its battle against terrorism, Libya will become the epicentre of instability in the Arab world. In many ways it all ready is.

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