Escalating conflicts in Libya are thwarting a revival of oil output from Africa’s largest crude reserves after a yearlong blockade of eastern ports, just as Societe Generale SA and Barclays Plc predict rising demand.
While the government said in early July that traders could buy cargoes again from Es Sider and Ras Lanuf, the biggest blocked ports, neither has shipped anything. In Tripoli, the capital, firefighters are still battling a blaze at a fuel-storage depot caused by clashes between militias that have been struggling for political power in the three years since the ouster and killing of longtime leader Muammar Qaddafi.
Brent crude futures have been trading as if supplies would be ample. Near-term contracts are priced at a discount to deliveries later in the year, a pattern known as contango, since July 8, the longest stretch in four years. Societe General and Barclays are among the banks predicting the discounts won’t last, with accelerating global growth driving global oil demand by more than Libya produced in any year since 1979.
“Investors became very excited about the reopening and underestimated the technical issues that have held up the resumption of exports,” Riccardo Fabiani, a London-based analyst at Eurasia Group, a political-risk group that specializes in energy. “They are only now coming to grips with a more complex picture.”