Supply Shock: Libya Declares Force Majeure at Sharara as Political Feud Escalates

On August 7, 2024, Libya's National Oil Corporation (NOC) declared a state of force majeure on crude exports from the El Sharara oil field, the country's largest production site. This move follows a gradual shutdown that began on August 3, orchestrated by local factions and security forces. The Sharara field, which has a production capacity of approximately 300,000 barrels per day (bpd), is vital to the Libyan economy and global energy markets. The shutdown is widely viewed as a political maneuver linked to domestic power struggles. Specifically, reports indicate that the order to close the field came from Saddam Haftar, the son of the Libyan National Army (LNA) commander Khalifa Haftar. The move is purportedly a retaliation against an arrest warrant issued by Spanish authorities targeting Saddam Haftar for alleged weapons smuggling. The Sharara field is operated by the Akakus Oil Operations joint venture, which includes the NOC alongside European partners Repsol, OMV, TotalEnergies, and Equinor. The suspension of operations has immediate implications for global supply, especially as the Zawiya terminal—where Sharara crude is exported—is now facing a significant shortfall. Kpler data suggests that at least five million barrels were scheduled for export in August, much of which is now at risk. The NOC warned that such closures damage the reputation of the Libyan oil sector and could lead to long-term technical issues within the field's infrastructure. In the global markets, Brent crude prices reacted with moderate gains, finding support near the $78 mark as the loss of Libyan volume offset broader concerns about slowing demand in China and the United States. This disruption highlights the ongoing fragility of Libyan output, which has been subject to frequent closures since 2011 due to rivalries between the UN-backed government in Tripoli and the LNA-aligned administration in the east. Energy analysts remain cautious, noting that while the current outage is contained to Sharara, any expansion of the protests to other fields could remove upwards of one million barrels per day from the market, significantly tightening the global oil balance.