Crude oil prices plunge over expectations for less demand during the pandemic just as more supply from Libya becomes available.

This file photo shows Ras Lanuf Oil and Gas Company in Ras Lanuf, Libya. August 18, 2020.
This file photo shows Ras Lanuf Oil and Gas Company in Ras Lanuf, Libya. August 18, 2020. (Reuters)

Libya's National Oil Company has said it expected oil production to rise to 260,000 barrels per day (bpd) next week, as the OPEC member looks to revive its oil industry, crippled by a blockade since January.

Oil prices fell around 5 percent on Monday, partly due to the potential return of Libyan barrels to a market that's already grappling with the prospect of collapsing demand from rising coronavirus cases.

Libya produced around 1.2 million bpd, over 1 percent of global production, before the blockade, which slashed the OPEC member's output to around 100,000 bpd. 

It was unclear how quickly Libya could ramp up production.

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Exports resume

NOC, in a statement late on Monday, said it is preparing to resume exports from "secure ports" with oil tankers expected to begin arriving from Wednesday to load crude in storage over the next 72 hours.

As an initial step, exports are set to resume from the Marsa El Hariga and Brega oil terminals, it said.

The Marlin Shikoku tanker is making its way to Hariga where it is expected to load cargo for trader Unipec, according to shipping data and traders.

Warlord Khalifa Haftar said last week his militias would lift their eight-month blockade of oil exports.

NOC insists it will only resume oil operations at facilities devoid of military presence.

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Oil prices fall

Both the US and Brent crude benchmarks posted weekly gains after Saudi Arabia pressed allies to stick to production quotas, Hurricane Sally cut US production, and banks including Goldman Sachs predicted a supply deficit.

Market sentiment fell after warlord Haftar announced he would lift his blockade of oil output for one month. 

Oil futures also tracked US stock indexes, which broadly fell.

Decade long conflict

Nearly a decade after rebel fighters backed by NATO air strikes overthrew long-time leader Muammar Gaddafi, Libya remains in chaos, with no central government.

The unrest has battered its oil industry.

Goldman Sachs said Libya's return should not derail the oil market's recovery, with an upside risk to production likely to be offset by higher compliance with production cuts from other Organization of Petroleum-Exporting Countries (OPEC) members.

"We see both logistical and political risks to a fast and sustainable increase in production," the bank said. 

It expects a 400,000 bpd increase in Libyan production by December.

OPEC and allies led by Russia are closely watching the Libya situation, waiting to see if this time Libya's return to the oil market is sustainable, sources told Reuters.

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Source: TRTWorld and agencies