In Geopolitics Today - Thursday, June 2nd
Truce in Yemen Extended, Libya’s Stalled Oil Production, OPEC+ Announces Monthly Production Increases
Truce in Yemen Extended
The United Nations has announced a two-month extensions of the truce established between the country’s Houthi rebels and the Saudi-led coalition. Yemen has been in a state of war since the Houthi rebels first took control of the capital Sana'a in 2014, triggering a Saudi-led military intervention in support of the government in 2015. The initial two-month truce began on April 2nd and was set to expire today, and the new truce holds the same conditions as the previous agreement.
Both Rashad Al-Alimi, leader of the Yemeni Presidential Leadership Council and Mahdi Al-Mashat, head of the Houthi political council, said they welcomed and accepted the UN proposal. The warring parties have largely stayed true to the original truce, but have thus far failed to reach a final agreement on lifting the siege of Taiz city. In order for the truce to fully deliver on its grounds, additional steps will need to be taken, particularly on reopening roads and restarting commercial flight operations. While there has been little sign that the parties to the war are pushing for a more permanent diplomatic solution, the extension of the truce is welcome in a country that is exhausted from war.
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Libya’s Stalled Oil Production
The Libyan economy has experienced a heavy loss of revenues, primarily from the country’s main revenue stream — oil. A blockade on oil exports by local militia forces in ports and fields of the Oil Crescent region has drastically reduced the amount of oil the country is able to export. Local militias have called for the sacking of the head of the National Oil Corporation (NOC), and for the appointment of a new board for the company. The NOC has said that production and exportation operations were still on halt.
The Libyan Oil and Gas Ministry said it had been following the closure of ports and oil fields via a special committee. The Ministry’s statement clarified that no civilian party was responsible for or related to the oil closure in the fields and ports. Nevertheless, oil flows to Europe, the largest destination for Libyan crude, have fallen this month. Libyan crude exports may recover in the coming weeks, but the end of port blockades and shutdowns may continue to stall production at some of Libya’s most productive oil fields. Europe’s desire to wean itself off Russian Urals presents an opportunity to Libya, yet even at a time of high oil prices instability and divisions have worked to cripple the country’s oil production capacity. .
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OPEC+ Announces Monthly Production Increases
OPEC+ will increase the size of monthly production increases by roughly 50%, bowing to months of pressure from major consumers seeking to ease the pain of high energy prices. The Organization of Petroleum Exporting Countries (OPEC) and its allies (collectively known as OPEC+) agreed to boost production by 648,000 barrels a day in the months of July and August.
Increasing oil production is a turnaround for OPEC+. The group, led by Saudi Arabia, has avoided rising oil production in the face of rising prices, sticking to established plans to gradually increase global oil supply. The high prices have been particularly profitable for the Saudi and Emirati oil sectors. These two are major energy producers, key to the OPEC grouping, and have both stressed a desire to let market forces decide the price of oil for now. The agreed additional supply increases from OPEC+ are expected to come from a number of countries, though only Saudi Arabia and the UAE have the spare capacity to quickly ramp up production.
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