Will Libya’s Crude Oil Production Rise in August 2017?



Crude oil prices 

October WTI (West Texas Intermediate) crude oil futures (DBO) (USO) (UCO) contracts fell 0.1% to $48.4 per barrel in electronic trading at 1:50 AM EST on August 24, 2017.

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Energy equity ETFs 

Moves in crude oil (IXC) (IYE) prices impact energy producers and ETFs. The top five energy equity ETFs’ YTD (year-to-date) returns ranked by assets under management are as follows:

  • The Energy Select Sector SPDR Fund (XLE) has fallen 15.7% YTD.
  • The Vanguard Energy ETF (VDE) has fallen 17.6% YTD.
  • The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has fallen 28.2% YTD.
  • The iShares U.S. Energy ETF (IYE) has fallen 16.7% YTD.
  • The VanEck Vectors Oil Services ETF (OIH) has fallen 33.8% YTD.

Libya’s Sharara oil field production 

On Wednesday, August 23, 2017, Libya’s Sharara oilfield was shut down due to a pipeline blockade. The Sharara oilfield is the largest oilfield in Libya with a production capacity of 280,000 bpd (barrels per day).

Libya’s crude oil production rose by 160,000 bpd (barrels per day) to 1.0 MMbpd (million barrels per day) in July 2017 compared to the previous month. The restart of the Sharara oilfield in May 2017 pushed Libya’s crude oil production to a four-year high in July 2017. However, the Sharara oilfield has faced multiple shutdowns due to security concerns. Supply outages could cause a fall in Libya’s crude oil production in August 2017.

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Libya and OPEC deal

Libya’s crude oil production rose 225%, or 700,000 bpd, year-over-year. Libya was exempt from the production cut deal and is allowed to produce up to 1.3 MMbpd.

Libya’s crude oil production estimates

National Oil Corporation (or NOC) estimates that the country’s production will hit 1.3 MMbpd and 1.5 MMbpd in 2017 and 2018, respectively. Libya’s production may hit 2.1 MMbpd in four or five years. Any rise in crude oil supplies has a negative impact on crude oil prices. Lower crude oil prices have a negative impact on the earnings of oil producers like ConocoPhillips (COP), Stone Energy (SGY), and Denbury Resources (DNR).

In next part, we’ll look at US crude oil inventories.


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