Standard & Poor's Global Platts has warned of a reversal of the recent rise in Libyan oil output as political stability remains elusive in the country.
Libya-based analysts and officials told Global Platts Wednesday that production fluctuations in Libya have become the norm in the past few years, and unless a broader lasting political solution is reached in 2021, more volatility is likely. Libyan oil production rose to more than 1.2 million barrels per day in December, the highest level since June 13, as all major oil fields and stations in the country were opened, a rare event last year.
Production reached this level a few weeks after the Government of National Accord (GNA) and the Libyan National Army (LNA) signed a UN-brokered ceasefire on October 23. However, despite this deal, there is still a split among many Libyan institutions, and the sensitive issue of oil revenues remains unresolved.
The U.S. agency expects Libyan production to maintain 1.2 million barrels per day in the first quarter of 2021, but said production stability in 2021 is "far from certain."
"The conflict in Libya is not yet resolved and could quickly disintegrate again in 2021," the agency added.
Under the recently agreed to ceasefire, the Government of National Accord and the Libyan National Army committed to forming a unity government and holding elections within 18 months. But the LNA continues to control the bulk of the country's oil infrastructure and talks between the two factions in the past few months have failed to make a breakthrough on some key issues.
Libya's National Oil Corporation (NOC) hopes for a stable year after a highly volatile 2020. But even the state-owned oil company currently finds itself in political turmoil.Both the NOC and the Central Bank of Libya (CBL) were involved in a dispute over the distribution of oil revenues. The NOC said late last year that it would refuse to release its oil revenues to the CBL until the formation of a national unity government.
NOC Chairman Mustafa Sanallah warned that funds from Libyan crude oil sales will not be transferred to the Central Bank of Libya until the bank shows "clear transparency" about how these funds are disbursed.
Since production resumed, demand for Libyan light crude has been strong from European and Asian refineries.