The El Sharara Oil Field in Libya has recommenced operation after a three-month siege by militants shut down operations.
State-owned energy company — National Oil Co. — which operates the oilfield, said production will return to full capacity soon. In the meantime, however, the El Sharara is expected to pump about 80,000 barrels per day.
“the noc has received assurances that site security has been restored, verified by our own inspection team, enabling staff to return to work.”
But while this is a good development for Libya, it could potentially destabilise efforts by the Organisation of Petroleum Exporting Countries (OPEC) to cut down on output in order to save crude prices from further decline.
The El Sharara Oil Field is the biggest oilfield in Libya, with a production capacity of 300,000 barrels of crude per day. Should it return to full production, OPEC might need to devise new ways of protecting crude prices.
Recall that OPEC and some of its allies agreed in December to cut daily crude output down to 1.2 million barrels. Many OPEC member states were required to abide by this measure, except for the likes of Libya which was exempted due to its internal upheavals.
The measure, which was meant to last for the first half of 2019 alone, has already helped global crude prices to rally. Global benchmark, Brent Crude, is currently trading at $65.82 barrels per crude all thanks to the OPEC cuts.
Note that OPEC members are set to meet next month to discuss whether to continue the supply reductions in the second half of the year.
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It is left to be seen whether the oil rally will continue, fueled by the OPEC cuts, and US sanctions on Iran and Venezuela.
In the meantime, however, some forces continue working against the crude prices. Even the US President, Donald Trump, recently demanded that OPEC cut down on oil price because the world cannot handle a hike.