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SAF Group: Expect Libya shut ins to continue given the escalation in fighting

Expect Libya shut ins to continue given the escalation in fighting

We do not expect any return of the oil production in the coming days. Rather the question will be how long will it be off and what needs to be changed to return the production. One of the other broadly reported stories today is the escalation in fighting, in particular how Haftar’s forces are moving on Misrata, a major 550,000 population city ~200 km east of Tripoli. The other broadly reported story is the escalation of arms being supplied by UAE to Haftar forces.
Surprised it has taken this long for Haftar to use oil as a weapon Reuters [LINK] and others quoted LIbya’s Tripoli based Central Bank Governor Sadiq Al-Kabir this week saying ““Now oil represents 93-95% of total revenue and covers 70% of total spending. This is a bullet in the head, that will hurt Libya and the Libyan people”. It is important to remember that even though approx. 80% of the oil production is in Haftar controlled eastern Libya, all export revenues flow directly to Tripoli based NOC. So Haftar shutting down oil production hits the Tripoli based govt. We are surprised it has taken this long for Haftar to use oil as a weapon. Our April 14, 2019 Energy Tidbits [LINK] highlighted this point with an item “Oil – Does Saudi/UAE backing give Libya’s Haftar the potential to use oil as a weapon?” And tweeted on April 13, 2019 [LINK] “Does Saudi/UAE backing give Haftar staying power to use oil as a weapon if he can’t win Tripoli quickly and must try to win via a semi siege? One more scenario that makes a Libya oil supply interruption seem inevitable and increasing risk premium to oil”. Our thought process was this was the best way to squeezes Tripoli based Libya government. We are just surprised he hasn’t done so until this week.