By Alice Seeley
Oil rose to a three-week high on April 18, with Brent crude reaching $113 a barrel as outages in Libya increase concern over tight global supply amid the Ukraine crisis.
Currently, there are major protests at Libya’s largest oil field, with government officials warning that all exports from Libya are now threatened. The field was already temporarily closed in early March when an armed group shut down valves delivering crude. Libya’s National Oil Corp announced on Monday, April 18, that “a painful wave of closures” began hitting its facilities and declared “force majeure” at the Al-Sharara oilfield and other sites.
Declaring force majeure is a legal move that allows involved parties to free themselves from contractual obligations when factors beyond one’s control make meeting those obligations impossible. It is not clear how many barrels of production Libya will lose because of the shutdown, but it is estimated to be around 1.2 billion barrels a day.
However, Robbie Fraser, a global research and analytics manager at Schneider Electric, believes the situation will resolve itself shortly because Libya has an “extended history of acute outages, and in most cases has managed to restore output relatively quickly as unrest eases.”
Although the Libya crisis may resolve itself, the European Union officials are currently drafting a ban on Russian oil imports. Russia’s Deputy Prime Minister, Alexander Novak, stated that energy prices would “significantly exceed” historic highs if this ban goes through. The U.S. and UK have already banned crude from Russia after the invasion of Ukraine.
The International Energy Agency warned that around 3 million barrels per day of Russian oil would be lost starting in May due to the bans.
