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17 Jan, 2021 15:36

Libya's worn-out pipelines may give more relief to battered oil market

Libya's worn-out pipelines may give more relief to battered oil market

Crude output of OPEC member Libya has fallen by up to 200,000 barrels a day due to a leaking pipeline, the country’s oil major has announced, noting that production levels can further decrease.

The troubled pipeline, linking the Samah and Dahra fields to the Es Sider oil terminal, was closed for maintenance on Sunday, the National Oil Corporation (NOC) said. The company explained that multiple leaks were found in the “worn out” pipeline, and it could take up to two weeks to fix it. However, it hopes that the operator of the link, Waha Oil company, can finish the work earlier, in seven to ten days.

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The recent drop in production wiped out around 16 percent of the nation’s daily oil output, bringing it to around one million barrels per day (bpd). However, the NOC warned that it lacks funds to carry out the repairs at some other sites that were left unattended or damaged during years of war and some companies are facing the same problems as Waha Oil.

“What happened with Waha today happens daily with other companies that suffer from a budget shortage. They are also under the threat of having to reduce their production and to even halt it completely,” it said in a statement. 

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Libya boasts Africa’s largest proven crude oil reserves and is one of the few members of the Organization of the Petroleum Exporting Countries (OPEC) that are exempt from the group’s output cuts. As the country’s oil production went back online last year, it created hurdles for the oil alliance as it attempted to cut global oil supply to boost oil prices that fell dramatically in 2020. 

The sudden drop in Libya’s crude production comes on top of the recent voluntary cuts by the world's largest oil exporter, Saudi Arabia, and could give another boost to the oil market that is still suffering from the consequences of the Covid-19 pandemic. Oil prices rose to multi-month highs after Riyadh revealed its intention to reduce its output by one million bpd for February and March on top of the OPEC caps. However, prices for both Brent and WTI were subdued at the end of the week, falling around two percent.

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