Libya’s Eastern Government Halts Oil Production in Bank Row

Libya’s eastern government has announced the immediate shutdown of all oil production and exports, escalating a dispute with its rival administration in Tripoli over control of the nation’s central bank. The decision has already sent ripples through global markets, with Brent crude prices jumping by as much as 3% to over $81 a barrel.

The eastern authorities declared a “force majeure” on Monday, effectively halting operations at all oil fields, terminals, and facilities across the region. Waha Oil Co., which supplies Es Sider—Libya’s largest export terminal—has begun gradually reducing shipments, signalling a significant disruption to the country’s oil exports.

Libya, home to Africa’s largest known crude reserves, has long been mired in political instability, which has frequently led to battles and blockades targeting its vital oil industry. Despite a 2020 United Nations-backed ceasefire intended to bring peace to the country, deep-seated divisions between Libya’s eastern and western factions continue to undermine stability and economic recovery efforts.

Since the 2011 overthrow of former leader Moammar Al Qaddafi, Libya has been split between rival governments in the east and west, each backed by different armed groups and international allies. This tug-of-war has crippled the nation’s economy and led to repeated shutdowns of key oil infrastructure, further exacerbating the country’s woes.

The latest crisis centres on the leadership of the Central Bank of Libya, which controls billions of dollars in energy revenues. For over a week, tensions have been mounting as the Tripoli-based government in the west seeks to replace the bank’s governor, Sadiq Al-Kabir, who has refused to relinquish his position. In a bold move on Monday, a government delegation reportedly entered the bank’s offices to assert control, intensifying the power struggle.

“The dependence of Libya’s economy on oil revenues means that whoever controls the state institutions overseeing these funds effectively controls the country’s economy,” analysts at Citigroup, including Francesco Martoccia, noted in a report. The central bank has become a battleground for Libya’s competing factions, each vying for control over the country’s most valuable resource.

Libya’s oil production, which reached approximately 1.15 million barrels per day last month, is already feeling the impact of the unrest. The shutdown of the Sharara oil field, the country’s largest, which was producing nearly 270,000 barrels per day, has further curtailed output. The Sirte basin in the east, where most of Libya’s oil reserves are concentrated, and its four main export terminals are also affected by the closure.

The ongoing dispute over the central bank’s leadership follows a series of controversial oil-sector firings by Prime Minister Abdul Hamid Dbeibah, leading to accusations that he is attempting to consolidate control over Libya’s oil industry.

As the situation develops, analysts at Citigroup warn that a prolonged drop in Libyan oil exports could push Brent crude prices into the mid-$80s per barrel, adding further strain to global energy markets. The unfolding events in Libya are a stark reminder of how the country’s internal conflicts continue to reverberate beyond its borders, with significant implications for the global economy.