(Bloomberg) -- Libya is set to restart the last of its major oil fields following a cease-fire in its civil war, a milestone for the OPEC member that’s been largely offline since January.
Oil dropped after the state energy firm lifted force majeure on exports from El Feel on Monday. The move will bolster the Tripoli-based National Oil Corp.’s attempt to boost Libyan production to 1 million barrels each day within a month.
The return of Libyan barrels is hindering OPEC+ as it tries to prop up crude prices amid a resurgence in coronavirus cases and with many major economies imposing lockdowns again. The oil producers’ alliance was set to ease supply cuts by almost 2 million barrels a day in January but may be forced into a delay.
Crude production from Libya’s western deposit of El Feel, or Elephant in Arabic, will reach normal rates of around 70,000 barrels daily within a few days, the NOC said. Force majeure is a clause in contracts allowing deliveries to be suspended.
Monday marks “the end of closures at all Libyan oil fields and ports,” the NOC said.
Libya’s output has risen rapidly over the past six weeks after Khalifa Haftar, a commander in the long-running war, ended a blockade of most energy facilities imposed in January. His representatives agreed to a permanent truce with the United Nations-recognized government of Prime Minister Fayez al-Sarraj on Friday. The two sides are set to meet in Tunisia next month to appoint a unity government.
While Libya has been in chaos since a 2011 revolt that overthrew former dictator Muammar al-Qaddafi, its oil industry has proved resilient. A rise in production from mid-2016 proved more sustainable than many traders expected, with the country’s output averaging around 1 million barrels a day in both 2018 and 2019.
The speed of the latest recovery has again taken markets by surprise and put pressure on oil prices, which have been hammered since the virus spread around the world. Brent crude dropped 2.4% to $40.78 per barrel as of 1:41 p.m. in London, deepening its fall this year to 38%.
Libya’s daily output has risen to 690,000 barrels from less than 100,000 in early September. Sharara, the country’s biggest field, reopened around two weeks ago, while the last two oil ports still closed -- Ras Lanuf and Es Sider -- restarted on Friday.
The Arab nation won’t be able to pump at December’s levels of around 1.2 million barrels a day due to damaged infrastructure and budget constraints, according to the NOC. The war has damaged storage tanks, pipelines and well heads, and it will cost hundreds of millions of dollars to fix them properly, the NOC has said.
Libya holds Africa’s largest oil reserves. Due to its strife, the nation was exempted from supply cuts that OPEC+ -- a partnership of the Organization of Petroleum Exporting Countries and others such as Russia -- agreed to in April at the height of the pandemic. The group, led by Saudi Arabia and Russia, initially cut output by 10 million barrels a day, roughly a 10th of global production.
Russian President Vladimir Putin said last week he didn’t rule out a delay in the OPEC+ alliance’s scheduled output hike at the start of next year. Saudi Energy Minister Prince Abdulaziz bin Salman said Monday the oil market is going through “serious harsh times.”
(Updates oil price in eighth paragraph; output level in ninth.)
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