Libya civil war worries to lift WTI just under $70 - TDS

Analysts at TD Securities point out that the armed conflict between forces loyal to General Haftar and the UN-backed government has erupted close to Libya's capital, Tripoli and has  raised the risk of a full blown conflict for Tripoli, which could potentially ignite civil war.

Key Quotes

“Last time around, that conflict left behind a patchwork of local, tribal and Islamist militias governing various fiefdoms, often without any rule based system which has been detrimental to the country's oil production. Concerns are emerging that this could happen again.”

“Following several months of disappointing production, Libya’s output recently recovered to 1.1 million bbls/last month. The additional crude is needed to balance the market, at a time when Venezuelan supply is likely to slide lower and as US sanctions against Iran are expected to exacerbate the negative impact on supply from the region.”

“At the same time, OPEC+ producers, which includes Russia, are set to remain disciplined with respect to their announced 1.2 million bbls/d production cuts, while US shale supply is topping and Canadian exports are down due to Alberta government mandated cuts.”

“It is unlikely that OPEC will would immediately act, until a disruption occurs and deep deficits materialize. US shale output is also unlikely to respond fast immediately, due to weak lackluster CAPEX capital expenditures and profitability in recent quarters. As such, we expect tightness and see WTI moving near $68/bbl into Q2. Thereafter, additional OPEC+ supply and more shale crude, in response to higher prices, should bring price WTI crude back to $60/bbl territory.”