Libya’s oil blockade – and the million b/d loss in exports

On 17 January, eastern Libya oil ports controlled by the Libyan National Army (LNA) were closed and oil exports stopped. Two days later, militia linked to the LNA shut-in production at the El Sharara and El Feel fields in the southwest of Libya. It is estimated that oil storage tanks will be full within days. Production is already falling from over 1 million b/d and could reach under 100,000 b/d, with oil flowing only from offshore fields and the western Wafa field. This is the latest in a long running battle for power between the internationally recognised Government of National Accord (GNA) in the west and its opposition backed by the LNA in the east. We don’t expect the blockade to last more than 2 weeks, but lack of a resolution means risks remain high for Libyan oil production.

In recent weeks Libya's oil production has increased significantly, from around 300,000 b/d in early September to close to 600,000 b/d today. This increase is being driven by the reopening of ports in Libya's eastern Oil Crescent. The ports had been blockaded for the last two years in a dispute over payments to a militia, the Petroleum Facilities Guard (PFG),  which ostensibly had been guarding the ports.   Libya's production increases have occurred despite the absence of a political agreement between competing administrations and an ongoing security vacuum. Yet there are reasons to think that recent production gains can be sustained, including the widely disliked PFG's demise in the east, military success against IS in Sirte and western incentives to reverse Libya's parlous state. Libya will seek to optimise production insofar as it can. Although an OPEC member, with its production having fallen so precipitously, it won't be bound by any production restrictions.