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Security continues being the biggest obstacle for Libya, one of
Africa's most significant oil producers. Lack of stability and the
ongoing conflict between rival governments do not allow any
optimism to be developed, with most international oil majors
reducing their exposure, as concern rises around the civil war and
its impact on the country's oil industry.
With almost no progress and investment in new exploration
projects, there can't be any hope that Libya will exploit its oil
reserves, estimated to be the largest on the continent, any time
soon. This could add another massive threat to the North African
nation, as current oil production and exports cannot be maintained
without any new projects becoming operational over the next couple
of years.
The sentiment has been deteriorating during the last couple of
months, with one after the other oil major abandoning Libya's new
projects. Both BP and Eni have already deferred plans to start
exploration in the country. The deal, originally signed in late
2018, to resume exploration in Libya, with Eni buying a 42.5% stake
in BP's Exploration and Production Sharing Agreement (EPSA), will
not materialize any time soon, at least not by those two
international majors.
The situation between rival governments has been threatening the
unity of the National Oil Company (NOC), with no clarity no over
budget allocations. NOC's officials seem to be concerned that the
country's oil production could fall sharply over the next nine
months if already approved budgets remain withheld.
Focusing on recent data on the country's shipments by IHS
Markit Commodities at Sea, loadings of crude oil seem to have
moved lower so far in October, with volumes not surpassing 900,000
b/d during the first three weeks of this month. In September one
million b/d of Libyan oil was loaded daily on ships, which has been
very close to the average volumes observed since March. This means
October might be the first month of a significant drop in Libyan
loadings to report. Between November 2018 and February 2019, the
country only managed to ship around 685,000 b/d; only time will
show whether recovery is still on track.
Shipments to Italy continue dominating the market, with volumes
having remained above 330,000 b/d since July 2019. Spain is the
second biggest importer of the country's oil, with shipments
standing at 160,000 b/d so far in October, exactly as much as it
has been so far on average in 2019. China's appetite for Libyan
grades has been rather volatile earlier this year, but with a
noticeable increase to report during the last couple of weeks.
The market share of Aframaxes seems to have increased
significantly during October, as rates of Suezmaxes have moved much
higher rather quickly earlier this month, in parallel to the rally
experienced in the market due to the US sanctions on Cosco
tankers.
Posted 28 October 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade