Libya central bank crisis negotiations resume recent rebounding oil prices may return to a downward trend

The negotiations regarding the crisis of the Libyan Central Bank led by the United Nations have resumed, as the destructive oil blockade has been ongoing for nearly two months, resulting in a significant decrease in oil production of this OPEC member country. It is understood that Elhadi Elsagir, a member of the Libyan parliament, informed the media that representatives of the eastern and western administrative authorities of the country will attend the negotiations held in Tripoli on Wednesday. Since mid-August, the rival factions of the Libyan government have been in dispute, when the UN-recognized Libyan government took action in the capital Tripoli, replacing the Central Bank governor, Saddek Kabir, who oversees billions of dollars of oil wealth in this North African country. However, the eastern regional government authorities of Libya rejected this demand and ordered the shutdown of all oil production and exports. It should be noted that the eastern region is where most of Libya's oil is extracted. In the weeks following the start of the oil blockade by the rival factions of the Libyan government, the daily production of the largest oil reserves in Africa dropped from over 1 million barrels before the crisis to about 450,000 barrels. However, oil exports are still entering the global market through some traders, and there has been a recent increase in exports in the past week. It is important to note that the resumption of the Libyan crisis negotiations may not necessarily be positive for recent oil prices. Before the negotiations resumed, the announcement of the oil blockade by the eastern government caused Libya's oil production to drop from over 1 million barrels to about 450,000 barrels per day, impacting global supply, especially in the oil supply chain of OPEC member countries. However, with more Libyan oil flowing into the global market, there could be an impact on oil benchmark prices - the recent slight rebound trend in Brent crude oil prices might be affected as the influx of supply could weaken Brent crude oil prices. Brent crude oil has been consistently weak since the beginning of the year due to soft demand caused by high global interest rates, with prices showing almost no change compared to the beginning of the year. Why does Libya have two government organizations? What triggered the central bank crisis? Libya's largest crisis in over four years has sparked intense global mediation efforts, attempting to prevent this important OPEC member country from slipping back into civil war. Turkey and Egypt had supported opposing factions during the 2019-2020 conflict, and they are pushing for a peaceful resolution between Libya's rival governments. The country's two legislative bodies - the House of Representatives in the eastern city of Benghazi and the High Council of State in the capital Tripoli - theoretically agreed to jointly appoint new leadership for the Central Bank. However, progress has been slow, and since September 12, no formal meetings have been held by either side. The reasons for Libya having two opposing governments can be traced back to the civil war in 2011 when the long-time ruler of Libya, Muammar Gaddafi, was overthrown, leading the country into political chaos and a power vacuum. Since then, Libya has been embroiled in struggles between different factions, resulting in multiple opposing governments and armed groups. The Eastern Government (Tobruk government) is led by the House of Representatives, located in the eastern city of Benghazi, and supported by General Khalifa Haftar, the leader of the Libyan National Army (LNA). This government is supported by countries including Egypt and the UAE. The Western Government (Tripoli government) is the internationally recognized Libyan government named the Government of National Accord (GNA), located in the capital Tripoli, supported and recognized by the United Nations. It is supported by countries like Turkey and Qatar. The differences between the two opposing governments of Libya regarding the position of the Libyan Central Bank primarily stem from the struggle for control of the institution. The Central Bank controls the country's oil revenue and foreign exchange reserves, which are the main economic resources of Libya. Due to the central role of oil revenue in the Libyan economy, controlling the Central Bank means controlling the country's resources. The Western government attempted to further consolidate control over the nation's economic resources by replacing the Central Bank governor, Saddek Kabir. The Eastern government strongly opposes this move, deeming its control over the Central Bank as illegal, and therefore declared an oil production and export blockade to pressure the Western government.