Libya is one of the world’s major oil producers
Libya, located in North Africa, is a member of OPEC (the Organization of Petroleum Exporting Countries) and one of the world’s major producers of oil. In stable times, the country produces 1.4 to 1.6 million barrels of crude oil per day (for context, world production is roughly 90 million barrels per day). Libya is also Europe’s third largest crude supplier and has Africa’s largest oil reserves. However, recent unrest has caused Libyan production to drop to less than 200,000 barrels per day.
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Unrest in Libya has caused persistent disruptions to oil production
Libya was a site of intense conflict during the 2011 Arab Spring and civil war, which caused oil production to plummet to near 0. Surprisingly, oil production in 2012 rebounded to pre-conflict levels. But unrest in 2013 has intensified, with disagreements regarding pay and conditions escalating into other demands. News reports have noted that most of Libya’s main export terminals closed down in early August, pipelines have been attacked, and production has halted in many fields across the country.
Through 1H13, Libya averaged ~1.3 million barrels of oil per day. However, reports in August showed production at less than 600,000 barrels per day. And the latest news has pegged production at less than 200,000 barrels per day. In total, this represents a more than 1 million-barrel-per-day loss to world oil production—or greater than 1%. Although on face, 1% may not seem like much, oil prices can be very sensitive to even small changes in supply.
Disruptions reduce Libyan supply, but other countries have stepped in
With the drop-off of supply in Libya, other countries have stepped up oil production. According to OPEC, Saudi Arabia has increased its output to ~10.2 million barrels per day—up over 10% since the beginning of 2013 and the highest level since 1980. Meanwhile, output from the United States continues to grow and has recently reached levels of ~7.6 million barrels per day—up from ~7 million barrels per day at the beginning of 2013 and the highest level in 24 years. Plus, increasing production from Iraq has helped to replace some lost Libyan barrels. According to OPEC, Iraqi oil production is at 3.2 million barrels per day—up 235,000 barrels per day from the prior month.
Some recovery over recent days
According to the Libyan news agency Lana, Libya has just begun to resume production at its 140,000-barrel-per-day field at El Feel and its 300,000-barrel–per-day field at Sharara. This would significantly increase Libyan output and could put downward pressure on crude oil prices, which would be generally negative for energy companies without Libyan exposure but positive for companies with significant assets in Libya.
However, the outlook for Libya remains uncertain, with geopolitical instability at least for now a high threat to production from the region.