Advertisement
Advertisement

The Lifting Of Oil Blockade At Libya’s Zuetine Does Not Signal The End Of Shutdowns

By:
Simon Watkins
Updated: May 2, 2022, 10:44 UTC

Libya's NOC lifted the oil blockade on key Zuetina Port overnight but this is unlikely to be followed elsewhere, leaving around half of its oil production closed off

Oil Pump Jack.

In this article:

Key Highlights

  • Libya’s NOC lifted the oil blockade on key Zuetina Port overnight.
  • This is part of a wider force majeure affecting around half of Libya’s oil production.
  • The lifting of the Zuetina blockade looks temporary and is unlikely to be followed elsewhere.

Given the current delicate supply and demand balance in the crude oil market, and market jitteriness about what comes next in the Ukraine-Russia conflict, the ongoing shutdown of much of Libya’s oil supplies has been an additional volatility component in oil pricing in recent weeks. However, although there are many reasons to be short of oil right now, news overnight of the lifting of the ban on the loading of crude oil from Libya’s Zueitina oil port is not necessarily one of them.

Zueitina had been under a state of ‘force majeure’ since the declaration to that effect on 18 April by Libya’s National Oil Corporation (NOC). This halted around 90,000 barrels per day (bpd) of the light, sweet crude oil grades that are in particular demand in the Mediterranean and Northwest Europe for their gasoline and middle distillate yields.

Around Half Of Libya’s Crude Oil Production Is Still Closed Off

This ban in Zuetina has been part of a wider blockade on major fields and export terminals in Libya that has resulted in the loss of around half – about 550,000 bpd – of its total oil production. The ban in Zuetina occurred at around the same time as similar bans on the 300,000 bpd Sharara field, the 70,000 bpd El Feel oil field, and the 60,000 bpd Brega operation, among others.

At the core of these shutdowns is a long-running political dispute between various factions in Libya centred in large part on the ‘fair distribution’ of oil wealth in the country. This concept is in line with the September 2020 ceasefire agreement between Khalifa Haftar, the commander of the rebel Libyan National Army (LNA) and elements of Tripoli’s U.N.-recognised Government of National Accord (GNA).

Deep-Seated Political Divisions Remain Over Libya’s Oil Sector

The specific groups that have been blocking the oil facilities most recently demand a fair distribution of crude oil income and the transfer of power to former interior minister, Fathi Bashagha, in dorect opposition to the supporters of the interim government of sitting Prime Minister, Abdulhamid Dbeibah.

However, this lifting of the blockade on Zuetina is unlikely to herald either a broader lifting of the blockade on the rest of Libya’s oil sector or a sustained peace deal among the rival factions any time soon. Tangentially underlining the point, the NOC made clear that the lifting of the blockade on Zuetina was just “a temporary lifting of force majeure” done to avoid environmental damage from leaking full storage tanks.

About the Author

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for Credit Lyonnais, and later Director of Forex at Bank of Montreal. He was then Head of Weekly Publications and Chief Writer for Business Monitor International, Head of Fuel Oil Products for Platts, and Global Managing Editor of Research for Renaissance Capital in Moscow.

Did you find this article useful?

Advertisement