Oil Markets in Turmoil: Libya’s Production Shutdown Sparks Global Price Chaos – What’s Behind the Crisis

News of Libya’s halt in crude oil production is <a href="https://newsdirectory3com/almost-17-increase-in-one-week-opec-production-cuts-drive-international-oil-prices-soaring-these-a-share-listed-companies-benefit/" title="Almost 17% increase in one week! OPEC+ production cuts drive international oil prices soaring, these A-share listed companies benefit”>sending international oil prices soaring. News of Libya’s decline in oil production is pushing up oil prices.

According to the New York Stock Exchange and Mercantile Exchange on the 3rd, while the New York Stock Exchange is closed for Labor Day, the price of Brent crude oil from the North Sea of the United Kingdom is rising. News that internal conflicts in VIA are causing disruptions in actual crude oil production is putting upward pressure on oil prices.

Libya announced that it was suspending oil production due to internal conflict. The government in Benghazi, eastern Libya, announced that it would close all oil fields and halt production and exports until further notice. Libya is a major oil producer, producing about 1.2 million barrels of crude oil per day and exporting more than 1 million barrels per day to the world market. Traders approached crude with a long position on the news that Libya had actually reduced its production.
Iraq, another oil-producing country, also announced plans to cut production.

Libya’s National Oil Company (NOC) declared “force majeure” on the eastern El Fil (Elephant) oil field on the 2nd (local time), saying that crude oil production there may be halted. In a statement on the day, the NOC said, “Due to the current crude oil production situation of (operator) Melita, loading operations cannot be carried out,” and announced that it was declaring force majeure as of that day. The El Fil oil field, which produces 70,000 barrels of crude oil per day, is operated by Melita, a joint venture between the NOC and Italian oil company Eni.

Force majeure is a local legal term referring to a situation that cannot be controlled due to external events such as natural disasters or war. If a force majeure claim is accepted, the responsibility and obligations under the contract can be avoided. Libya is divided into the Government of National Unity (GNU) in the west, which is recognized by the international community, and the Government of National Stability (GNS) in the east, which is supported by General Khalifa Haftar’s Libyan National Army (LNA). The GNU, which controls the capital city of Tropoli, recently attempted to oust the central bank governor, who had clashed over oil resource management and the national budget, but the GNS opposed this, and the conflict between the two sides has intensified.

Meanwhile, Reuters reported, citing sources, that eight member countries of OPEC+, a consultative body between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producing countries such as Russia, are planning to increase production as planned. This measure is expected to increase production by about 180,000 barrels per day starting in October. OPEC’s suspension of production cuts, coupled with the prolonged internal conflict in Libya, is acting as a factor in causing chaos in international oil prices.

Kim Dae-ho, Director of Global Economic Research Institute tiger8280@g-enews.com