Oil Tumbles Below $75, Erasing All 2024 Gains On Hopes Of Libya Production Restart

Brent crude has extended its recent losses (sparked last week by the Reuters trial balloon that OPEC+ would boost output due to the Libyan oil production snafu) and tumbled sharply below $75, because the same Libyan oil snafu that allegedly was about to prompt OPEC+ to pump more is about to be resolved (doesn’t matter if it is all circular, as long as oil is sliding ahead of the election: algos will try to make sense of the lack of logic later).

Brent slumped below $75, erasing all YTD gains…

… and WTI tumbled briefly below $71 after Bloomberg reported that according to a Libyan central banks, an oil restart in the country is expected to happen “soon.” The report comes hours after the UN – desperately working on behalf of Kamala Harris in hopes of pushing oil and gas prices even lower – hosted talks in Tripoli meant to resolve Libya’s central bank crisis and that “key understandings” had been reached.

That, at least, is the hope (which of course is what CTAs trade on). The reality, meanwhile, is rather different, and overnight Libya’s state oil firm declared force majeure on key field El-Feel amid a widening shutdown of production triggered by a power struggle in the OPEC member.

The force majeure, a legal clause that allows companies to suspend contractual obligations due to circumstances beyond their control, came from National Oil Corp. after authorities in the east stopped all output and exports in a dispute with rivals over control of the central bank.

The country’s production has more than halved since then. El-Feel was pumping about 70,000 barrels a day.

As reported last week, the eastern and western governments are in a standoff over the bank, the custodian of billions of dollars of energy revenue. Eastern authorities ordered the freeze after the internationally recognized government in the capital, Tripoli, replaced Governor Sadiq Al-Kabir. Al-Kabir, who’s feuding with Tripoli-based Prime Minister Abdul Hamid Dbeibah and has allies in the east, rejected the order to step down, prompting western authorities to take over the bank’s headquarters.

The nation was pumping about 1 million barrels daily before the halt order, with the vast majority of that coming from the east. Daily output in the past week plunged to about 450,000 barrels.

While oil prices in London jumped above $80 a barrel when the production halt was announced last week, they’ve slipped since on concerns about global demand, on the Reuters fake news report (because there is no way OPEC+ will boost production with oil prices at 1 year lows), and on hopes that the LIbya production halt may be lifted… eventually.