WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Monday's session with gains between 1% and 1.5% after political unrest in Libya shutdown the nation's largest oilfields, El Feel and El Sharara, exacerbating a supply deficit in the global market that is grappling with loss of Russian oil exports following Moscow's invasion of Ukraine.
Libya's National Oil Company said on Monday violent protests with protestors demanding the resignation of Prime Minister Abdul Hamid Dbeibah have disrupted between 500,000 and 800,000 bpd in the country's oil production, affecting nearly half of the north African nation's 1.2 million bbl in daily output. NOC officials have further warned that outages will likely continue amid a wave of demonstrations that aim to shutter Libya's already ailing energy complex.
Tribal leaders in southern Libya earlier announced they were halting production from the oil field there until Dbeibeh hands over power to the newly appointed government of Fathi Bashagha. They also called for the sacking of Mustafa Sanalla, the head of the NOC, and for the appointment of a new board for the company.
Political turmoil in Libya prompted a 370,000-bpd decline in March oil production, according to secondary sources from Organization of the Petroleum Exporting Countries, with oil output likely to decline further in April. NOC formally suspended loadings from the eastern port of Zueitina and said it was the "start of a painful wave of closures."
The unrest and subsequent oil export disruptions in the north African nation are coming at a time when sanctions and self-embargos are reducing the global market's availability of Russian oil exports. Newswires on Monday were flooded with reports suggesting European Union leaders are drafting proposals for the bloc to ban Russian oil exports as fighting in Eastern Ukraine escalates.
"The European Union is spending hundreds of millions of euros on importing oil from Russia, that is certainly contributing to financing this war. We need to cut off that financing ... the sooner that can happen the better," said Irish Foreign Minister Simon Coveney.
Data from the U.S. Energy Information Administration showed that, in 2021, EU bought 2.3 million bpd of Russian oil -- almost half of Russia's exports.
Dependence on Russian oil varies widely across the bloc, with countries such as Bulgaria almost totally dependent on Russian oil. Hungary has already said it cannot support an oil embargo.
Faced with growing risks for the global economy, the World Bank slashed its worldwide economic growth forecast from 4.1% to 3.2% on Monday, citing the Russian-Ukrainian war.
"Sixty percent of low-income countries are already in debt distress or at high risk of it," the World Bank said. The bank is said to be preparing a $170 billion package in response to the war, a larger sum than its $157 billion COVID-19 package.
Russia is suffering from its own debt crisis as Western sanctions have crippled Moscow's ability to service foreign-currency bond payments while its economy is expected to shrink by 15% this year. Russian Central Bank Governor Elvira Nabiullina said on Monday that the economy cannot survive indefinitely on its financial reserves and will have to transform itself to deal with the impact of international sanctions.
"The main problems will be associated with restrictions on imports and logistics of foreign trade, and in the future with restrictions on exports. Already in the second and third quarter we will enter a period of structural transformation and the search for new business models," said Nabiullina.
On the session, NYMEX May West Texas Intermediate advanced $1.26 to settle at $108.21 bbl, and ICE June Brent contract rallied $1.46 to $113.16 bbl. NYMEX May RBOB futures slipped 0.33 cents to $3.3781 gallon, and May ULSD contract gained 3.6 cents to $3.8908 gallon.
Liubov Georges can be reached at firstname.lastname@example.org