Libya is split between rival governments, a legacy of the ouster of longtime ruler Muammar Gadaffi in a 2011 uprising.
A Tobruk-based parliament in February appointed a new prime minister, Fathi Bashagha, a direct challenge to the United Nations-backed government in the capital Tripoli led by interim Prime Minister Abdul Hamid Dbeibah, noted Helima Croft, head of global commodity strategy at RBC Capital Markets.
Demonstrators at the oil facilities are demanding the removal of Dbeibah and the firing of the head of the National Oil Corp. for transferring $6 billion to the nation’s central bank. Dbeibah has refused to step down, saying he would only hand over power to a legitimately elected government, news reports said.
While Libya’s turmoil is new, it’s worth pointing out that Russia is the “principal patron” of Gen. Khalifa Haftar, a powerful eastern militia leader who tried to seize power in Tripoli in 2019 with the aid of Russian mercenaries from the Wagner Group, Croft said in a note titled, “Convenient Coincidence?”
That attempt failed, but Haftar remains the primary kingmaker in eastern Libya and has been tied to the unrest at the oil facilities, she said, while the Wagner Group, a private Russian military force, continues to have a significant presence in the oil-rich country. Libyan and Ukraine news reports have said that Haftar struck a recent deal with the Kremlin to recruit mercenaries to serve in Ukraine.
“There are no indications at this point that Russia has played an active role in the latest Libyan oil disruptions,” Croft wrote. “Nonetheless, at a minimum the outage works in Moscow’s favor by further tightening the market and keeping prices elevated while Western leaders continue to express concerns about the inflationary impact of additional Russian energy sanctions.”
The Libyan outages were cited as a factor behind a rise in crude oil prices Thursday, with June Brent crude BRN00, 0.22% BRN22, -0.99%, the global benchmark, rising $1.53, or 1.4%, to close at $108.33 a barrel on ICE Futures Europe. West Texas Intermediate crude for June delivery CL.1, 0.12% CL00, 0.12% CLM22, 0.12%, the U.S. benchmark, rose $1.60, or 1.6%, to settle at $103.79 a barrel on the New York Mercantile Exchange.