Crude oil production in Libya has been declined to the critical low level close to civil war period. If other members of the Organization of Petroleum Exporting Countries do not increase supply enough, global balance of petroleum supply and demand could be significantly tight.
Labour dispute has been increasing in broad industries of Libya since June. In energy sector, the nation's crude oil output, that had been about 1.4 million barrels per day during first five months in this year, dipped to 1.2 million bpd in June and sunk further to 1.06 million bpd in July.
Average crude oil production in August is estimated at 500 thousand bpd level due to the spreading of strike in major ports. Brega is the only port currently continues shipment at moment, while other major ports have been closed since mid-August.
Moreover, armed group closed pipeline between western major oil fields and ports in late August. Current Libyan crude oil output is estimated at below 300,000 bpd due to the pipeline closure.
Libyan crude oil output once declined from 1.6 million bpd to nearly zero in the civil war period in 2011. NYMEX crude oil futures surged from about $90/bbl to above $110/bbl at that time.
Saudi Arabia and other OPEC members increased supply urgently in order to make up for the shortage. However, recovery of Libyan oil supply was faster than expected after the cease of the civil war in October. OPEC's total crude oil production in Q2 2012 exceeded the pre-war level by 1.5 million bpd. Crude oil futures dropped to below $80/bbl.
What about current situation? Global balance of petroleum supply and demand in Q3 2013 estimated by the U.S. Energy Information Administration or International Energy Agency and OPEC are as follows.
Necessary volume of OPEC crude oil is estimated at about 30-30.4 million bpd. Meanwhile, OPEC and IEA estimate actual OPEC members' total output in July at about 30.4 million bpd. Average production level in August is seen at 30.2 million level, according to surveys by media.
Since current Libyan production level is estimated to decrease by more than 300,000 bpd from the August average, total OPEC output could be below 30 million bpd. OPEC is not able to supply enough crude oil to the required volume if other members do not increase production.
On the other hand, Libya is anticipated to recover supply sooner after ending the strike, so other OPEC members aggressive supply may cause oversupply in the world crude oil market again.