Oil Prices Spike as Libya’s Eastern Government Announces Halt to All Production

Oil prices jumped by nearly 3% early on Monday, buoyed by fears of escalating conflict in the Middle East and Libya’s rival government in the east announcing the closure of all oilfields, production, and exports.

The Benghazi-based government in eastern Libya, which is a rival to the Tripoli-based government in the politically divided North African OPEC producer, said on Monday it would shut down all crude oil output and exports.

The threat to Libyan oil production and exports follows the move from the Tripoli-based government to replace the leadership of the country’s Central Bank in an escalating row about who should oversee Libya’s oil revenues.

The “force majeure” on Libyan oil production will apply to all oilfields, oil facilities, and export terminals, according to a Facebook post by the eastern authorities cited by Bloomberg.

The east-based government backed by military leader Khalifa Haftar is not internationally recognized, but Haftar and his people control most of the country’s oilfields.

However, as of Monday midday local time, Libya’s National Oil Corporation (NOC), the company controlling the country’s oil resources, had not confirmed any information about a halt to production.

Over the past weeks, the situation in Libya has deteriorated with the east-west rivalry flaring up again and centered on the leadership of the Central Bank of Libya—the guardian of Libya’s wealth and income from oil exports and the only internationally recognized depository for these revenues.

The internationally recognized government in the capital city in the west, Tripoli, is trying to replace Sadiq Al-Kabir, the governor of the Central Bank of Libya. This has led to the latest controversy between the eastern and western governments and political factions, threatening again to reduce Libya’s oil production and exports.

Last week, the Central Bank resumed operations, after the kidnapping of one of its employees and a rival government attempt to oust its head, as the battle to control the financial institution intensifies. Tripoli has attempted to force eastern-aligned Central Bank governor Al-Kabir out and replace him with Mohamed Shukri.