In a developing crisis that has captured the attention of global oil markets, Libya's oil production has experienced a significant decline due to a power struggle between rival factions. The Haftar clan in the east of the country has orchestrated a blockade of oil facilities, aiming to gain leverage in their battle for control over the Central Bank, which manages Libya's oil revenues.

The initial shutdown of oil production caused a sharp surge in oil prices. However, this was mitigated by a lower-than-expected draw on U.S. crude stockpiles, as reported in the weekly inventory update. As of Thursday, Libya's daily oil production has plummeted by 700,000 barrels, representing a substantial reduction from the projected 1.2 million barrels per day production for 2024.

The impact of the power struggle has been felt across various oilfields, with either complete shutdowns or reduced output observed at the Sarir, Abu Attifel, Amal, and Nafoora oilfields. Some forecasts suggest that the loss in output could reach as high as 1 million barrels per day. The duration of this crisis remains uncertain, with experts unable to predict how long it might take for one faction to seize power.

Of particular concern is the unfolding Libyan Central Bank scandal, marked by the ambiguity surrounding its current control. The governor, Al-Kabir, who is entangled in a dispute with Dbeibah, is notably absent for the past few days. Reports have emerged suggesting that Dbeibah's supporters have regained control of the bank, only to find it abandoned. However, they reportedly lack the crucial password keys to access its vast resources.

While international attention has been focused elsewhere, such as recent developments in Israel and Iran, and intermittent tensions between Russia and Ukraine, the sudden supply disruption in Libya has had an immediate impact on oil markets. The situation in Libya has the potential to escalate further, with the depth of the conflict ultimately shaped by the actions of external actors.

The conflict unfolding in Libya is essentially a war between the two clans: the Haftars in Benghazi and the Dbeibahs in Tripoli. Spearheading the shutdown of Libya's largest oilfield, Sharara, is Haftar's son, Saddam, who was recently promoted to the position of chief of staff of the Libyan National Army. Following the shutdown, his forces have begun moving westward, signaling an impending civil war. The outcome of this conflict depends significantly on external actors, although at this point, it seems inevitable.

Libya has been precariously held together by a corruption-laden kleptocracy, where various parties profited from illicit fuel-smuggling schemes. However, this semblance of stability has proven fragile, with even the slightest disruption causing the current crisis. Haftar currently maintains the upper hand, having amassed considerable wealth and power over the past year.

As the situation unfolds, the international community will closely monitor Libya's power struggle and its severe impact on global oil markets. The resolution of this conflict will require strategic interventions and diplomatic efforts to prevent further chaos and ensure the stability of Libya's oil production and revenue management.