Libya prepares to boost oil exports as key ports reopen

An oil storage tank at Sidra port. Libyan plans to lift crude exports have eased market fears of a supply crunch. (AFP)
Updated 11 July 2018
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Libya prepares to boost oil exports as key ports reopen

  • Four Libyan export terminals are being reopened after eastern factions handed over the ports
  • However war-torn North African country thought unlikely to be unable to plug expected losses from Iran and current outage from Venezuela

LONDON: The price of Brent crude fell Wednesday after Tripoli-based National Oil Corp. (NOC) said four Libyan export terminals were being reopened after eastern factions handed over the ports.

The move, which ends a standoff that had shut down most of Libya’s oil output, was expected to lead to an export uplift of 800,000 barrels a day that was lost in recent weeks after factional infighting.

But in an interview with Arab News, Shakil Begg, global head of oil research at Thomson Reuters in London, said while the Libyan development would ease market concern of a looming supply crunch, the war-torn North African country would be unable to plug expected losses from Iran, or mitigate the current massive outage from crisis-hit Venezuela.

Begg said: “We are skeptical about how much Libyan crude can be exported quickly. One issue is the extent to which some fields have been shuttered because they can’t store the oil being produced.”


He added: “Our expectation is that supply growth will be pretty moderate.” Pipeline infrastructure was susceptible to attack, he said.

Analysts have said the reimposition of US sanctions on Iran by late 2018 could remove between 600,000 and 1 million barrels per day available to global export markets — a threat that has seen the price of Brent crude reach $80 a barrel. On Wednesday, following the Libyan announcement, the price retreated from just under $79 to $77.50.

Begg said that only Saudi Arabia could sustain a big rise in production from around 10.5 million barrels per day to about 11 million barrels in order to plug lost Venezuelan and Iranian production.

“They have between 500,000 and 600,000 barrels of spare capacity which could come onto the market,” said Begg. But even this might not be enough plug supply gaps, he suggested.

A report in Petroleum Economist on July 3 said Libyan eastern ports that fell under the control of Khalifa Hafter’s Libya National Army (LNA), saw the destruction of storage tanks in fierce fighting.

For instance, Ras Lanuf’s storage capacity was cut from 950,000 barrels to 550,000. “With limited storage, and tanker arrivals often episodic, field managers across the Sirte Basin may need to halt pumping operations, cutting daily (Libyan) output,” said Petroleum Economist.

Neil Atkinson, head of oil industry and markets at the International Energy Agency, told Arab News that Venezuela’s production could fall by the end of this year by another several hundred thousand barrels a day, “given the degradation of the oil industry there, a prognosis that is quite widely accepted,” he said.

Begg said Saudi Arabia was increasing production now, but a lot of the increase was being consumed domestically as temperatures rise and demand for air conditioning soars.

Begg forecast that prices this year would hover between $72/bbl to $80/bbl, but could spike at $85/bbl and he had a similar forecast for 2019.

A statement on NOC’s website said the company was aiming for “the lifting of force majeure in the ports of Ras Lanuf, Es Sider, Hariga and Zuetina after the facilities were handed over to the corporation this morning, July 11.”

“Production and export operations will return to normal levels within the next few hours,” said NOC.

The statement also said that “the chairman (Mustafa Sanalla) and members of the board of directors of the NOC commended the Libyan National Army General Command for putting the national interest first.”

Sanalla also said Libya needed a proper national debate on the fair distribution of oil revenues.

“(This) is at the heart of the recent crisis. The real solution is transparency, so I renew my call on the responsible authorities, the ministry of finance and central bank, to publish budgets and detailed public expenditure. Libyan citizens should be able to see how every dinar of their oil wealth is spent.”

FASTFACTS

Libya, with Africa’s largest crude reserves, lost hundreds of thousands of barrels of daily production last month amid clashes between armed militias.


Apple Watch, FitBit could feel cost of US tariffs

Updated 20 July 2018
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Apple Watch, FitBit could feel cost of US tariffs

SAN FRANCISCO: The latest round of US tariffs on $200 billion of Chinese goods could hit the Apple Watch, health trackers, streaming music speakers and other accessories assembled in China, government rulings on tariffs show.
The rulings name Apple Inc’s watch, several Fitbit Inc. activity trackers and connected speakers from Sonos Inc. While consumer technology’s biggest sellers such as mobile phones and laptops so far have faced little danger of import duties, the rulings show that gadget makers are unlikely to be spared altogether and may have to consider price hikes on products that millions of consumers use every day.
The devices have all been determined by US Customs and Border Patrol officials to fall under an obscure subheading of data transmission machines in the sprawling list of US tariff codes. And that particular subheading is included in the more than 6,000 such codes in President Donald Trump’s most recent round of proposed tariffs released earlier this month.
That $200 billion list of tariffs is in a public comment period. But if the list goes into effect this fall, the products from Apple, Fitbit and Sonos could face a 10 percent tariff.
The specific products listed in customs rulings are the original Apple Watch; Fitbit’s Charge, Charge HR and Surge models; and Sonos’s Play:3, Play:5 and SUB speakers.
All three companies declined to comment on the proposed tariff list. But in its filing earlier this month to become a publicly traded company, Sonos said that “the imposition of tariffs and other trade barriers, as well as retaliatory trade measures, could require us to raise the prices of our products and harm our sales.”
The New York Times has reported that Trump told Apple CEO Tim Cook during a meeting in May that the US government would not levy tariffs on iPhones assembled in China, citing a person familiar with the meeting.
“The way the president has been using his trade authority, you have direct examples of him using his authority to target specific products and companies,” said Sage Chandler, vice president for international trade policy at the Consumer Technology Association.
The toll from tariffs on the gadget world’s smaller product lines could be significant. Sonos and Fitbit do not break out individual product sales, but collectively they had $2.6 billion in revenue last year. Bernstein analyst Toni Sacconaghi estimates that the Apple Watch alone will bring in $9.9 billion in sales this year, though that estimate includes sales outside the United States that the tariff would not touch.
It is possible that the products from Apple, Fitbit and Sonos no longer fall under tariff codes in the $200 billion list, trade experts said. The codes applied to specific products are only public knowledge because their makers asked regulators to rule on their proper classification. And some of the products have been replaced by newer models that could be classified differently.
But if companies have products whose tariff codes are on the list, they have three options, experts said: Advocate to get the code dropped from the list during the public comment period, apply for an exclusion once tariffs go into effect, or try to have their products classified under a different code not on the list.
The last option could prove difficult due to the thousands of codes covered, said one former US trade official.