Forces loyal to Libya's eastern military leader are advancing west towards Tripoli, sparking concerns that could soon be out in a key oil-producing nation.
The advance of Haftar's LNA could potenti ally answer the "million dollar question" Libya watchers have been asking for years, says Helima Croft, global head of commodity strategy at RBC Capital Markets. Will finally seek to consolidate control over Libya's northern coast, leaving the nation's eastern oil terminals vulnerable to his rivals?
"We don't know what this really is, but certainly if he's going to take control of Tripoli by force , the question is, does this mean that these sizable energy assets are under his control in the east? " Croft said.
The potential conflict comes at a time when global crude supplies are tight and oil prices are steadily advancing towards $ 70 a barrel. On the demand side, global consumption is growing faster than many expected. On the supply side, OPEC and its allies led by Russia are cutting output while the U.S. is poised to tighten energy sanctions on Iran and Venezuela.
Analysts and traders keep a close eye on Libya because its oil production has been one of the biggest wild cards in the oil market in recent years. Its output has fluctuated wildly as far as the nation's southern oil fields have gone offline amid fighting among Libya's patchwork of militia and tribal and ethnic groups. This year, Haftar's LNA forces have sought to bring order to the southern oil-producing region.
This year, Haftar's LNA forces have sought to bring order to the southern oil-producing region. If Haftar takes control of the west, it could be negative for oil prices because consolidated leadership could allow more crude to the market from Libya, says Croft.
However, Croft cautions that it would be difficult for any leader to impose Order over the country, and a battle in Tripoli could be a prelude to fighting. Holding Tripoli, the east and the south could stretch the LNA's capacity to the breaking point.
"The problem with the south is like the Wild West down there," she said. "There are so many competing militias down there. You have a community that feels so marginalized, that is heavily armed."
"To me, that's a powder keg."