OIL gets geopolitical risk test

Watch the oil price the next 24 hours as it faces the geopolitical risk test. Over the weekend Aljazeera and Bloomberg reported that Libya has imposed Forces Majeure on 2 oil ports and is taking measures to halt output at some oil fields because of armed clashes in the politically-divided North African country. The oil ports of Es Sider and Ras Lanuf are Libya’s largest and third-largest oil ports with a combined capacity of 560,000 barrels a day. Libya is producing about 800,000 barrels a day of crude, NOC spokesman Mohamed Elharari said Dec. 8. To put it into perspective the IEA cut FY15 global demand by 230K barrels a day Friday sending Brent ~-3%, and Saud Arabia’s excess capacity is estimated at 1.5 to 2 million barrels a day (according to the EIA).

Libya, holder of Africa’s largest oil reserves, is divided after its internationally recognized government, led by Abdullah al-Thinni, sought refuge in the country’s east since Islamist militias took over Tripoli about four months ago.

I am by no means calling for the bottom of the oil price slump, but this could trigger some short-term short covering. I think this is only important in the sense that this is the first major test (geopolitical) for oil.  If this news is ignored then I think Oil has much more downside risk.

Links to 2 articles: Aljazeera: Libya clashes force oil port closure & Bloomberg: Libya Imposes Force Majeure on 2 Oil Ports After Clashes