Libya’s Plans to Reopen its Oil Ports Spell Even More Bad News on an already Damaged Crude Market
Crude oil prices are on the decline yet again, all on the word of OPEC member Libya’s plans to reopen its oil ports as soon as this upcoming weekend. As of Monday afternoon 14/9, Texas Intermediate (WTI) and Brent crude futures are lower, with WTI October deliveries down to $37.26 per barrel, while Brent November deliveries are below $40.
The drop in price comes following a statement which was released on Saturday from the U.S. Embassy in Libya, that the factions fighting over control of the North African country had come to an agreement that would permit the national oil company to restart exporting crude oil from its terminals that have been blockaded since the start of the year.
Since the start of the year, Libya’s internal troubles, and the closure of its oil export facilities, have slashed its oil exports from over 1 million barrels per day to roughly 100,000 barrels. The overall deduction of this oil is a minimal amount of the decline in global demand during the coronavirus pandemic, but it certainly helped lower some production from an already oversupplied market.
According to Libya’s press release, their intent is for a “full reopening” of the country’s energy sector. 2020 has been unforgiving across the sector, with global demand still down by double digits in many countries as transportation and industrial activity remain suppressed by the ongoing pandemic.
The weekend announcement from Libya comes after a torrid week for oil prices. The U.S. market remains extremely oversupplied as demand flatlined after a summer peak season. And after months of focusing heavily on demand from China, Aramco turned its attention to the U.S. market last week, cutting prices to U.S. refineries for the first time in 6 months, even as it lowered prices to Asian customers below its own benchmark targets.
The combination of this is likely to put huge pressure on U.S. oil producers and their prices. Demand is not likely to rebound quickly anytime soon, and global oil giants like the Saudi’s and Libya can easily win a price war with American independents, most of which can’t hit oil profitability for less than $40 USD a barrel, most of them need prices sitting above the $50 mark to cover their production and corporate costs.
The news continues to get more desperate for the oil patch, with companies like Occidental Petroleum, who were counting on crude prices holding above the $40 mark in the second half of the year, just saw its path forward take a serious turn for the worse.
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