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Will Libya’s Crude Oil Production Decline in May?

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Supply outages in Libya  

On May 22, the crude oil production at the Libyan Arabian Gulf Oil Company declined to ~145,000 bpd (barrels per day) from ~260,000 bpd, according to Bloomberg. The production declined due to the hot weather in Libya. The production could start again when the weather normalizes. Supply outages are usually bullish for crude oil prices.

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Libya’s crude oil production  

According to the U.S. Energy Information Administration, Libya’s crude oil production averaged 1,005,000 bpd in April. Libya’s production was near a five-year high. The increase in Libya’s production coincided with the rise in Brent and US crude oil prices.

Brent and WTI oil prices have increased ~158% and ~160%, respectively, since February 11, 2016. The Guggenheim S&P Equal Weight Energy ETF (RYE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) rose ~65% and ~82%, respectively, during the same period. RYE aims to follow the performance of the S&P 500 Equal Weight Energy Index. XOP aims to follow the performance of the S&P Oil & Gas Exploration & Production Select Industry Index.

Resolute Energy (REN), California Resources (CRC), and Delek US Holdings (DK) account for 5.4% of XOP’s holdings. These stocks have risen ~1,313%, ~1,020%, and ~351%, respectively, since February 11, 2016. These stocks have been among the top percentage gainers in XOP’s portfolio since February 11, 2016.

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Libya and supply cuts 

Libya was exempt from ongoing supply cuts due to economic issues. The country’s crude oil production averaged 384,000 bpd in 2016 and 817,000 bpd in 2017.

Impact  

Libya plans to increase its crude oil production in 2018 despite ongoing production cuts mandated by OPEC. National Oil Corporation of Libya plans to increase the country’s production to more than 2 MMbpd by 2022. National Oil Corporation of Libya is the country’s state-owned oil company. An increase in Libya’s oil production could pressure crude oil prices. However, an unexpected production outage could benefit oil prices.

Next, we’ll discuss Iraq’s crude oil production.

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