Libya resumes oil production, ending embargo and easing political crisis

(Bloomberg) — Libya resumed oil production on Thursday, returning hundreds of thousands of barrels a day to global markets after a political standoff in the OPEC member eased.

The nation’s eastern government, which had initially ordered the halt to output, has lifted the embargo, allowing all fields and export terminals to resume, according to a statement on its Facebook page. The largest field Sharara, where 260,000 barrels a day of supply shut before the political feud started in late August, has also resumed, people with knowledge of the operations said.

The North African country typically produces more than 1.2 million barrels daily, but that plunged to under 450,000 after the divided country’s United Nations-recognized western government fired the central bank governor, spurring its eastern rival to order an oil shutdown in response. Libyan output has often been held hostage to political wrangling as opposing sides jostle for control of the key sector.

The returning supply will put more downward pressure on crude just as an escalating conflict in the Middle East has lifted prices to above $75 a barrel. The market is still grappling with weak demand, while some OPEC members are preparing to gradually revive supply from December. Libyan production may return to levels before the shutdown in three to four days, people with knowledge of the plan said.      

Representatives from Libya’s dueling administrations agreed Sept. 26 to appoint a new central bank governor, Naji Issa, easing a deadlock over a post that effectively gives control over billions of dollars in energy revenue. They still need to agree on other officials on the bank’s board.  

Last month’s deal, like previous Libyan pacts, sits on shaky foundations. A UN-backed cease-fire in 2020 succeeded in ending fighting but has yet to lead the country to nationwide elections or solve the long-running split between east and west.

Libya has been wracked by unrest since the 2011 overthrow of longtime dictator Moammar Qaddafi, with clashes between armed groups loyal to different factions or individuals frequently shutting key oil fields as they vie for influence. The country has Africa’s biggest known crude reserves.