US calls for immediate resumption of Libya oil operations

Oil Disruption in Libya, Iraq Can Be Counterbalanced by Opec

Tripoli - The United States called Tuesday for an immediate resumption of Libya's lifeline oil exports that have been blocked by forces loyal to military strongman Khalifa Haftar since last week.

"The suspension of National Oil Corporation (NOC) operations risks exacerbating the humanitarian emergency in #Libya and inflicting further needless suffering on the Libyan people," the US embassy in Tripoli tweeted.

"NOC operations should resume immediately," it said.

Haftar's forces, at war with fighters loyal to the UN-recognised Government of National Accord, blocked oil exports from Libya's main ports on Saturday, a day before an international peace conference.

The move to cripple the country's main income source was a protest against Turkey's decision to send troops to shore up Haftar's rivals.

The action has suspended operations from Libya's "oil crescent", blocking several export terminals including Brega, Ras Lanuf and Al-Sidra ports.

"The storage capacity of these ports is limited and the NOC will be obliged to put a complete halt to crude production once maximum capacity has been reached," the oil company said Monday.

The NOC said Libya's daily crude output of 1.3 million barrels a day would be virtually wiped out, translating into losses of $77 million a day.

According to industry experts, Washington also opposes the suspension of Libyan crude exports because of the impact on the world oil market.

Hamish Kinnear, an analyst at risk consultancy Verisk Maplecroft, said Haftar's action was a "blunt reminder" that his forces control most of Libya's oil and gas resources.

"The fact that the shutdown coincided with the Berlin conference, a high-level Libya peace summit... is no coincidence," he said.

"By shutting the fields, Haftar was making it clear that he holds a veto over any proposed ceasefire agreement or eventual political agreement."

World leaders at the Berlin conference, in a final declaration on Sunday, said they opposed "hostilities against all oil facilities and infrastructure" in Libya.

The oil-rich North African country has been torn by fighting between rival armed factions since a 2011 NATO-backed uprising killed dictator Moamer Kadhafi and toppled his regime.

Oil Disruption in Libya, Iraq Can Be Counterbalanced by Opec

Oil prices fell more than 1% on Tuesday January 21st, on expectations that a well-supplied market would be able to absorb disruptions in oil supply in Libya and Iraq.

Brent crude fell 98 cents, or 1.5%, to $64.22 per barrel, having earlier touched $66 a barrel, the highest since January 9th.

President of the Petroleum Association of Japan (PAJ) Takashi Tsukioka, confirmed on Monday January 20th that market unrest caused by supply cuts in Libyan and Iraqi crude, could be offset by increased output from the Organisation of Petroleum Exporting Countries (Opec), limiting the impact on global oil markets.

“Oil prices may fluctuate due to the latest incidents, but we don’t have to worry too much about demand and supply balance as Opec can cover shortfalls (from Libya and Iraq),” Tsukioka told a news conference cited by Reuters.

The Libyan National Oil Corporation (NOC) said two major oilfields in southwest Libya had begun shutting down on Sunday, reducing national output to a fraction of its normal level.

The market impact from Libya is expected to be short-lived Tsukioka said and that there was a report of an Iraqi oilfield suspending operations due to labour issues, without giving further details.

According to a Bloomberg report, “Work at an oilfield in Iraq was temporarily halted on Sunday and supply from a second production site was at risk,” and this in the wake of the unrest which has escalated due to the ongoing anti-government protests in Iraq, which is considered one of Opec’s biggest producers.

Tsukioka said Japanese refiners could buy oil from the shared oilfields between Kuwait and Saudi Arabia, from which Japan had bought oil in the past.

The PAJ 's statements echoed those of Opec Secretary-General Mohammed Barkindo made earlier after US -Iran tensions escalated in Iraq.

“It is a big relief that Iraqi oil facilities are secured, and the country’s production is continuing,” Barkindo said on the side lines of a conference in Abu Dhabi, United Arab Emirates. He said he was optimistic that Iraq would reach 100% compliance with Opec cuts in time, despite current tensions. Barkindo said the forecast for growth in global demand was around 1 million barrels per day (BPD).

Energy Minister Suhail Al Mazrouei of the UAE, a major OPEC producer in the region, said earlier that after the tension in Iraq, he saw no immediate risk to oil travelling through the vital gateway of the Strait of Hormuz. “The situation is not a war, and what is happening now should not be exaggerated,” Al Mazrouei said on the side lines of a conference in Abu Dhabi.

(APF / 7D)

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