Global oil outages at 1.2mn bpd in March
GLOBAL oil supply outages are running at more than a million barrels a day, a Reuters survey has found, helping provide justification for the United States and Britain should they release strategic reserves in a bid to cut oil prices.
Civil unrest, adverse weather and technical glitches disrupted 1.2 million barrels per day (bpd) of global oil output in March on the 90 million bpd world market, according to a Reuters calculation from information provided by companies, government agencies and traders.
While disruptions of supply to the world oil market are commonplace, it is rare and perhaps unprecedented that such a large volume of oil is offline at any one time outside a single major disruption.
The aggregate reduction now is close to the volume of exports lost from Libya during civil war last year which at its worst knocked out 1.4 million barrels a day.
The International Energy Agency opened emergency reserves for only the third time last year to cover that loss but is resisting doing so again, arguing that it does not see a significant supply disruption.
The United States and Britain were reported by Reuters last week to be planning a bilateral release. South Korea would support a release, a government source said, but has not yet had an approach to do so. Others including Germany and France are opposed to an increase. “I think it’s pretty clear from the administration’s references to Sudan’s and other outages that if it decides to use the SPR (Strategic Petroleum Reserve) it will justify it partly on various recent disruptions,” said a former White House energy advisor, Bob McNally, who heads consultancy Rapidan Group.
Leading oil exporter Saudi Arabia has raised its own output to 9.85 million bpd in February, according to a Reuters survey, but is the only producer with significant spare output capacity to counter serious shortfalls.
Some of the current outages could ease in April, when output from Canadian and Australian oilfields is expected to resume after temporary shutdowns. In addition, Libyan output is fast rising toward pre-war levels.
Supplies from politically volatile producers Syria, Yemen and South Sudan may remain disrupted for a prolonged period. Sanctions against Iran could also offset any increase in output from other countries, tightening oil supply later this year.
“Australian productions are just about to come back after the cyclone,” said Seth Kleinman, analyst at Citigroup. “But you always want to bet on more supply outages than less. The situation in Sudan and South Sudan has shown no signs of improvement and the key to watch is oil loadings from Iran,” he said.
Cyclone Luna last week forced Woodside Petroleum and Apache to shut several oilfields in Australia.
Woodside’s Enfield has already restarted.
With Apache’s Stag likely to follow soon, about 65,700 bpd of Australian oil and about 320,000 bpd of Canadian oil, which has been unexpectedly closed off, are likely to come back to the market in April.
Still, a larger chunk of about 710,000 bpd in South Sudan, Yemen and Syria remains shut and shows no sign of an early return.
Disruptions may grow as a European Union ban on Iranian crude takes effect on July 1 and as pressure increases on Asian importers to reduce oil purchases from Iran. EU countries late last year were importing about 700,000 bpd of Iranian crude.
The IEA estimates Iran’s oil exports could be curtailed by between 800,000 and 1 million bpd from the middle of this year.
Citi’s Kleinman said Nigeria should be kept on the watch list. Although there have not been any significant outages in March, Africa’s largest producer suffers from sabotage attacks to oil production facilities, which have forced oil majors such as Royal Dutch Shell to suspend exports.
In the North Sea, the UK’s largest oilfield Buzzard has been experiencing sporadic technical glitches, which have reduced its output since last year.
Buzzard’s output fell to about 153,000 bpd earlier in March but recovered to a normal 200,000 bpd late last week.