Libya’s National Oil Corporation confirmed an explosion at a pipeline near Maradah that is operated by al-Waha Oil Company. The line outage is expected to drop Libyan output by 70,000 to 100,000 barrels per day for an unknown period.
The price of West Texas Intermediate oil popped up about 2.6 percent, settling at $59.97 a barrel in New York. Brent crude was trading at $67.05; typically Alaska North Slope crude slightly lags the price of UK Brent.
ANS prices are estimated by the Department of Revenue; the price estimate posted most recently was $64.41, but that was on Dec. 22.
The explosion in Libya was said to be a terrorist attack. According to the Libya Times, “We broke the news earlier today on Twitter citing LNA officials who blamed the explosion on “Islamist militants from the so-called Benghazi Defence Brigades”.
In 2016, news reports said ISIS had sent a group of terrorists to attack several strategic oil fields and the foreign workers in Libya. Since 2011, when Muammar Gaddafi was toppled, the country has been producing less than one fifth of the oil it had previously produced.
The bombed out pipeline links oilfields belonging to al-Waha Oil and the port of Sidrah on the Mediterranean Sea that ships 447,000 barrels per day, nearly half of the country’s overall production. al-Waha is a subsidiary of National Oil Corporation and is a joint venture with Hess Corp, Marathon Oil Corp and ConocoPhillips.
In August of 2016, North Slope oil was selling at about $50 a barrel and state analysts did not expect it to rise further, due to an oversupply of oil in the world markets. Today, that oversupply has been largely absorbed.
The Alaska Department of Revenue now forecasts North Slope oil to be $56 per barrel in the fiscal year ending in July, and $57 in FY 2019. Since Oct. 27, oil has remained over $60 a barrel.
It appears that the actual price could exceed the state’s forecast, at least in the short term. Each dollar in price represents about $25-$30 million in revenue for the State of Alaska. That gives an approximate $100 million more to the State of Alaska than it expected, if oil remains over $63.
But the Department of Revenue says the State needs prices to be at $102 a barrel in order to pay for the services it currently provides.
With West Texas Intermediate hovering around $60 per barrel, production from the nimble U.S. shale oil regions can be expected to surge over the next 3 to 6 months. But for now, oil prices are trading at the upper end of their expected midterm range of $40 to $60 per barrel. These comparatively higher prices will inure to the benefit of the Alaska State Treasury, at least for now.
Gov. Bill Walker proposed a $4.7 billion budget (Undesignated General Funds only) for FY 2019, which is $500,000 more than he proposed a year ago.