Crude Oil Trade: Libya’s big plans to expand

The North African producer seems to have recovered well, even with increasing concerns around the impact of the ongoing civil conflict. Libya's performance so far this quarter has not been anything we have seen at the end of 2018. The country's liftings have been close to 960 thousand b/d on average between early April and mid-June. The growth has reached almost 40% since the first quarter of this year.

We should keep in mind that apart from Libya's oil production, the global oil industry has been going through severe changes recently. Almost within a month, oil prices reported severe losses, with a barrel of Brent crude oil falling sharply from more than 70 USD to levels marginally above 60 USD per barrel. The recovery observed last week, just after the recent attacks on two tankers in the Gulf of Oman, was thought to be a sign of change in the market's sentiment. However, we have not seen any boost in prices so far. The market has been rather flat since then with more pessimism developing for the second half of the year. There is still concern about the global demand growth turning weaker than earlier anticipated, driven by the rising uncertainty. Even under these conditions, Libya has just announced plans to double its crude oil production before 2025.

Libya's production could surpass 2 million b/d by the end of 2023, assuming there are no future disruptions which would allow the country to secure required investments to improve the technology used and start more projects in near future. The country has already been in discussions with some of the major oil companies regards procurement contracts worth 60 billion USD.

In terms of destinations, European importers have continued to absorb most of the Libyan output. There has only been a marginal decline in volumes reaching Europe since 2018. Bigger losses have been reported for Asian destinations, with a 12.2% decline for the region. This decline is even larger when we exclude China, as the total trade flows for the rest of Asia has dropped by about 25%. China continues importing more than 100 thousand b/d, only marginally lower than 2018's levels. However, the flows from Libya to China have been characterized by rather high volatility so far this year. This suggests that most Chinese importers have been simply trying to fill any gaps by importing more from the North African producer, adjusting levels according to price differentials developing.

Source: IHS Markit's Commodities at Sea

Posted 20 June 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence