INTERVIEW: Libya's oil minister rules out OPEC embargo amid Israel-Gaza war

Libya's oil minister does not expect OPEC to go for an embargo similar to Arab action in 1973 that caused a global oil crisis because the 13-member group includes non-Arab countries which may not have the same political position of Arab oil producers opposing Israel's intensified war in Gaza.

"OPEC includes non-Arab countries [and] perhaps they will not be willing to do it (oil embargo)," Mohamed Oun told S&P Global Commodity Insights in a Nov. 21 interview.

Several Arab members in OPEC have criticized Israel's war on Gaza and the high Palestinian civilian death toll from the bombardment, which comes in retaliation for the Oct. 7 attack on the Jewish state by Palestinian militant group Hamas.

OPEC member Iran has been the most vocal producer within the group calling for a Muslim oil embargo, which has so far been rejected by the Gulf producers. Such Iranian calls come as OPEC+ ministers are due to meet Nov. 26 in Vienna to discuss 2024 production levels. OPEC currently pumps almost 30% of the world's oil and the wider OPEC+ alliance contributes to more than 40% of global supply.

1973 oil embargo

Jasem AlBudaiwi, secretary general of the Gulf Cooperation Council, has rejected calls for an embargo, akin to action in October of 1973, when Arab producers cut production, hiked oil prices and halted shipments to the US and a few other consuming countries for their backing of Israel in the war with Egypt and Syria. The GCC includes Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain and all countries are OPEC+ members except for Qatar.

US oil imports from OPEC's Gulf members reached 740,000 b/d in 2022, or about 12% of total imports, compared with 802,000 b/d in 1973 or about 25% of total imports at the time, according to data from the US Energy Information Administration.

The 1973 embargo created an unprecedented global oil crisis that led to the quadrupling of prices and gasoline shortages in the US. The embargo helped incentivize the US to stockpile oil through the creation of the Strategic Petroleum Reserves.

As a Libyan national, Oun called on Arab countries to take action to penalize Israel and its Western backers in the war on Gaza, without mentioning the use of oil as a weapon.

"Every means that can pressure the Western community to pressure Israel to stop these massacres should be done and have to be done," said Oun. "We should not relax or be reluctant to do that."

Government decision

Most Libyan politicians have condemned Israel's war on Gaza, but there has yet to be a consensus calling for weaponizing oil to penalize Israel and its US-led Western backers.

Any Libyan action to weaponize oil would be a government decision and cannot be an oil ministry decision, Oun said.

Libya's current oil exports to the US pale in comparison to volumes in the 1970s. Outflows were at 133,000 b/d in 1973, and rose to a peak of 642,000 b/d in 1979, compared with 79,000 b/d in 2022, according to US Energy Information administration data.

Iranian calls for an oil embargo come amid massive voluntary oil cuts from Saudi Arabia and Russia, the two countries co-leading OPEC+. These cuts are on top of the 2 million b/d OPEC+ curbs that started in November, 2022 and have been extended till the end of 2024.

Voluntary oil cuts

Saudi Arabia's output, subject to voluntary cuts of 1.5 million b/d since July, averaged 9 million b/d in October, a two-year low, according to the latest Platts survey by S&P Global.

Russia, which is implementing a 300,000 b/d export cut for October that includes refined products, produced 9.47 million b/d, the survey showed.

The voluntary cuts from Saudi Arabia and Russia helped prices nearly touch $100/b in September. However, prices have since dropped even after the Oct. 7 attack raised initial market concerns about the security of oil supply from the Middle East region.

Platts' assessment of Dated Brent has dropped to $82.2/b on Nov. 21 from $91.3/b on Oct. 9, according to S&P Global data.