ICE Brent Near 1-Month High on Libya Crude Export Disruption

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- After a muted start to the trading week, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange pushed higher in early trade Tuesday on reports Libya's National Oil Company declared force majeure on oil exports from the port of Marsa el-Hariga following a sharp production decline in the key eastern fields due to a reported row in budget revenues.

The force majeure on Libya's crude exports is expected to broaden to other facilities, according to sources familiar with the developing crisis, after a long-standing disagreement on revenue distribution prompted NOC's subsidiary Arabian Gulf Oil Co. to halt operations in the eastern fields of Sarir and el-Bayda. NOC said Tuesday morning the nation's crude production will likely fall by 280,000 barrels per day (bpd) in the coming days as operations in adjoined fields of Hamada, Mesla and Majid have also been impacted.

The dispute over so-called field allowances paid to Libya's Petroleum Facilities Guard controlled by General Khalifa Haftar are at the center of a developing budgetary crisis. Haftar, sometimes described as "Libya's most potent warlord," controls a large chunk of eastern terminals and oil fields and has clashed with the finance ministry over payouts to his loyal paramilitary forces.

Arabian Gulf Oil Co said the government in Tripoli failed to send funds to cover operations since September 2020.

Libya was mired in a bitter civil war for most of the past decade after Muammar Gaddafi was deposed by NATO-backed forces in 2011, with rival political factions battling for control of the country's prolific oil fields. In October 2020, the United Nations recognized government in Tripoli and opposition forces led by Khalifa agreed to a ceasefire, which included generous payouts to the parties that controlled the eastern fields.

Libya, north Africa's largest oil producer, pumped 1.196 million bpd of crude oil in March, its highest output rate since June 2013, according to the Organization of the Petroleum Exporting Countries.

Early morning gains in oil futures were also supported by reports OPEC together with Russia-led partners plan to scale down a full ministerial meeting planned for next week to just a monitoring session. On April 1, OPEC+ agreed to gradually raise crude production over the next three months, making a cautious bet on a summer rebound in global oil demand. Should reports be confirmed, this would signal producers are content with the pace of the demand recovery and do not see a reason to further adjust production quotas.

The 23-nation coalition led by Saudi Arabia and Russia plan to boost output by 350,000 bpd in both May and June, and to lift the increase by 450,000 bpd in July. On top of that, Saudi Arabia will roll back its voluntary extra 1 million bpd cut, adding 250,000 bpd of crude production in May, 350,000 bpd in June and 400,000 bpd in July.

In early trade, NYMEX West Texas Intermediate for May delivery faded overnight gains to trade near $63.50 per barrel (bbl) ahead of expiration Tuesday afternoon, with the June contact trading at a roughly $0.10 premium to the expiring contract. International crude benchmark Brent contract for June delivery gained $0.30 to trade near $67.35 bbl. NYMEX May ULSD futures traded little changed near $1.8920 and May RBOB futures traded near $2.0447 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges