Libyan oil output surges above 1 million bpd

The return of Libyan oil poses a challenge for Opec+ at a time when it is cutting back a significant volume of output

A general view of refinery on Libya's El Sharara oilfield. Much of Libya's production has remained offline during the civil war that erupted between rival factions after the downfall of Muammar QaddafShow more

Libya’s oil production climbed back above one million barrels per day, after a force majeure that had been in place since the beginning of the year ended.

The North African country is currently pumping 1,036,035 bpd, Libya’s National Oil Corporation said on its website.

The company also said that such production levels may not be sustainable, due to an accumulation of debts from months of shutdown.

"It is worth mentioning that the National Oil Corporation faces very big financial difficulties and a huge shortage of its budgets which led to accumulating of debts on the sector’s companies and significant delay for the salaries of its service companies,” the statement said.

It also said that production may be "reduced or totally ceased” due to political unrest in the country.

Blockades have resulted in lost Libyan oil production worth $6.5 billion since the start of the year and an increase in the cost of rebuilding infrastructure, according to the NOC.

Much of Libya’s oil production was affected by the civil war that led to the overthrow of Muammar Qaddafi in 2011.

Production, which stood at about 1.75m bpd before the conflict, fell by 850,000 bpd in the years that followed as protests and blockades prevented crude exports from leaving the country’s ports.

Libya produced 1.2 million bpd in 2018 and 2019, but its output dwindled to a mere 106,000 bpd in August, according to Opec's secondary sources.

The return of Libyan oil poses a challenge for Opec+ at a time when the group is cutting back a significant volume of output to drain a glut in inventories and stabilise prices.

The alliance, headed by Saudi Arabia and Russia, is currently drawing 7.7m bpd from the markets. The group executed historic supply cuts of 9.7m bpd between May and July to counter a record plunge in demand due to mobility restrictions that were enforced to contain the Covid-19 pandemic.

West Texas Intermediate fell 4.25 per cent to $37.14 per barrel on Friday, while Brent was down 3.62 per cent at $39.45 per barrel as markets factored in the prospects of Democratic candidate Joe Biden becoming the next US President.

Opec+ has so far exempted Libya from participating in the production restriction deal. However, higher output from North Africa's largest producer is likely to raise concerns at the group's next meeting.