Qatar crisis spills into Libya

Oil prices fall to seven-month low after news of increase in supply by several key producers

The Qatar crisis is reverberating in Libya, inflaming political divisions in the war-torn oil exporter and dragging commodity-trading giant Glencore Plc into a dispute over crude sales.
 

The row involves competing administrations of the National Oil  that are vying to control crude exports from the Opec member. In eastern Libya, the local military commander is backed by Saudi Arabia, the United Arab Emirates and Egypt, three of the countries attempting to isolate Qatar. The head of the NOC in that part of the nation has accused Qatar of using its 8.5 per cent stake in Glencore to control the the Swiss trader’s sales of Libyan crude.

The chairman of the NOC administration in the western city of Tripoli, Mustafa Sanalla, denied that Qatar has control over Glencore’s operations. He said NOC extended an agreement with Glencore to sell all quantities of Mesla and Sarir crude blends that exceed the needs of local refineries.
 

Oil prices fell nearly 3 per cent to seven-month low on Tuesday after increase in supply by several key producers overshadowed high compliance by Opec and non-Opec oil producers with a deal to cut global output amid a continued sell-off driven by funds.
 

Brent was down $1.09 at $45.82 a barrel by 1:00 pm (1700 GMT), after hitting $45.42, its lowest intraday since November 15, two weeks before the Opec and other producers agreed to cut output by 1.8 million barrels per day (bpd) for six months from January.
 

The deal, originally signed in 2015, was renewed in December and now runs through the end of the year, Sanalla said in a June 11 letter addressed to a Libyan legislator and given to Bloomberg.
 

According to a source, Opec and non-Opec oil producers' compliance with a deal to cut global output has reached its highest in May since they agreed on the curbs last year, reaching 106 per cent last month, a source familiar with the matter said on Tuesday.

Opec compliance with the output curbs in May was 108 per cent, while non-Opec compliance was 100 per cent.

“The National Oil succeeded in selling all the available production from Mesla and Sarir thanks to its contract with Glencore despite the fierce war for consumers in the international markets,” Sanalla said in the letter. “This contract allowed Libya to earn regular foreign currency inflows.” Glencore declined to comment.
 

Qatar, the world’s richest country per capita and biggest producer of liquefied natural gas, faces commercial isolation after Saudi Arabia, the UAE, Bahrain and Egypt cut economic and diplomatic ties with the country last week. Their gambit threatens to exacerbate instability in Libya, which is struggling to restore oil output and exports after it collapsed into lawlessness following a 2011 uprising.
 

The Abu Attifel oil field, operated by Mellitah Oil & Gas, resumed production after halting in March due to a technical failure and lack of storage space, a person familiar with the situation said Wednesday. In another sign of progress, the Sarah oil field also restarted pumping crude after the NOC announced it has settled differences with Wintershall AG, according to another person familiar with the matter.
 

Nagi Maghrabi, chairman of the eastern NOC, accused Qatar of “financing terrorists” in Libya through Glencore’s sales of the country’s crude. Qatar controls Glencore through its shareholding, he said in a June 9 interview with the Cairo-based Youm7 newspaper. 
 

The head of the eastern government, Tobruk-based interim Prime Minister Abdullah al-Thinni, ordered an NOC unit called Arabian Gulf Oil Co. and other companies to immediately halt crude exports and cancel all deals with Glencore or any other business that has links with Qatar. 

Agoco operates the eastern port of Hariga, which exports the Mesla and Sarir crude blends. Any violators of the order will face legal challenges, Al-Thinni said in a statement dated June 14 and posted on his cabinet’s website.
 

The Qatar Investment Authority, the nation’s $335-billion sovereign wealth fund, has a stake of less than 9 percent in Glencore. It also has significant shareholdings in Rosneft PJSC, Royal Dutch Shell Plc, Barclays Plc and Volkswagen AG. The QIA has no representatives serving on Glencore’s board so has no operational control over the company, Sanalla said in his letter, addressed to Yousef al-Akouri, a member of Libya’s parliament and president of the committee in charge of NOC affairs.
 

For Libya’s remaining crude blends, the Tripoli-based NOC has sales agreements with 15 other companies, Sanalla said. They include Eni SpA, Total SA, OMV AG, Repsol SA, Rosneft Oil Co., Lukoil PJSC, Cepsa, Saras SpA, Socar, Unipec, Vitol Group, Gunvor Group, Petraco SpA and BB Energy, he said.

 

Peter Grauer, the chairman of Bloomberg LP, is a senior independent non-executive director at Glencore.