Libya’s oil slowly comes back online after deal, driving speculation
The original deal, which was agreed to on Sunday, would have allowed two oil ports to open after a nine-month blockade that stopped 700,000 barrels of oil per day from flowing and cost the country $7 billion. An undisclosed amount of money was agreed to be given by the General National Congress, Libya’s legislature, to Ibrahim al-Jathran, the leader of the rebels in eastern Libya.
The end of the blockade had been heralded in the oil futures markets. Libya, an OPEC member, holds Africa’s largest oil reserves and the price of “ Brent crude,” a trading benchmark for oil prices worldwide, has dropped about 3 percent since January amid speculation that Libya would ramp-up its oil exports. Traders and suppliers here in the U.S. calculated that the re-entry of Libyan oil on the world market would decrease the price, leading to even lower costs for refined fuel. But speculators feared that rebel protests would continue and oil futures reached a 5-week high on the New York market–also driven by increasing U.S. consumer confidence and energy instability in Eastern Europe. Brent crude prices see-sawed on news that Libya would continue to open its production lines.
After the deal to re-open Libya’s oil terminals, the nation is operating at only 10 percent of its capacity, still stymied by protests. Overall, Libyan oil output has plummeted from 1.4 million barrels per day in 2012 to about 350,000 barrels per day in February 2014.