Clashes between rival factions in Libya could further roil global oil markets and regional stability, according to analysts.
The recent move by rogue military commander Field Marshal Khalifa Haftar to give control of key oil export facilities in Eastern Libya to rivals of the U.N.-backed Libyan government has only escalated the battle for control of oil assets.
With Haftar’s allies in control of eastern ports, the prospect of reunifying Libya and stabilizing crude oil production seems less likely, according to reports.
Analysts at ClearView Energy Partners say Haftar’s actions could make the “global oil supply outlook even more precarious” by increasing unplanned supply outages from 400,000 barrels per day to 500,000 barrels per day.
“That said, since the CY2011 fall of the late President Muammar Gaddafi, various factions within Libya have jockeyed for oil revenues,” ClearView analysts wrote in a research report sent out Friday.
“We do not anticipate a quick, non-violent resolution,” ClearView analysts wrote.
A major worry is the illegal export of crude oil under illegal contracts, which would deprive the U.N.-backed government of much-needed revenues. U.S. and European forces have sanctioned companies alleged to have smuggled oil.
Rival factions have fought for control of Libya and its oil assets for years following the death of former dictator Muammar Gaddafi in 2011. (RELATED: Mike Bloomberg Is Paying For ‘Legal Fellows’ To Help Democratic State Attorneys Resist Trump)
Haftar’s seizure of eastern oil ports came after 10 days of fighting in central Libya, causing oil production cuts and leaving more than 300 people dead. The U.S., U.K., France and Italy condemned Haftar’s handing of ports to his allies.
“Libya’s oil facilities, production, and revenues belong to the Libyan people,” the U.S. and its allies said in a joint statement issued Wednesday.
“Any attempts to circumvent the UN Security Council’s Libya sanctions regime will cause deep harm to Libya’s economy, exacerbate its humanitarian crisis, and undermine its broader stability,” they said.
However, media reports suggest Haftar’s health may be failing, adding another element of uncertainty to the outcome of Libya’s ongoing civil war.
Libyan oil production has steadily increased since 2016, but monthly production can be erratic. ClearView analysts noted that “monthly oil production has veered dramatically between ~0.2 MM bbl/d and ~1.0 MM bbl/d.”
“We think the ebbs and flows in Eastern Libyan oil production may be coming from the Arabian Gulf Oil Company’s Messla and Sarir oil fields, and may reflect security and oil export terminal capabilities,” ClearView reported.
“Media reports suggest the second-largest oil export terminal in Eastern Libya, Ras Lanuf, incurred significant damage during the recent conflict,” they added.
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