News Report / The fall of Middle East regimes and renewed conflict have squeezed oil supply, returning the region’s politics to the fore as an energy worry for the world.
A ship is connected to the Basra Oil Terminal off the Iraqi coast in the waters close to the port town of Umm Qasr (file). Iraq, last year the world’s fastest-growing oil exporter, has failed to grow its output so far in 2013 ………………………………………….
Oil outages in Iraq, South Sudan, Libya and Iran are combining to help keep oil prices well above $100 a barrel, partly countering the rise in US shale oil supply and concern about the strength of Chinese demand.
“Geopolitics are firmly back on the radar,” said Soozhana Choi, analyst at Deutsche Bank. “This is occurring against a backdrop of North Sea field maintenance and strong refinery demand for crude oil.”
Disruptions in the Middle East and North Africa arise as supply from the North Sea is undergoing a heavier-than-usual spell of summer maintenance and as the flow of Russian Urals crude to Europe has fallen with more heading to China, further tightening supply at a time of higher seasonal demand for crude. Supply losses are over 700,000 bpd according to Reuters calculations and industry sources and could reach 1mn bpd – 1.1% of world output – if South Sudan goes ahead with a threatened shutdown of its production.
“Production is currently underperforming and significantly so,” said David Hufton of oil brokers PVM. “Being an oil bear is a tough existence in the short-term trading world.” The supply losses are boosting prices. Benchmark Brent crude futures traded just above $107 a barrel yesterday, up from its 2013 low of $96.75 reached in April. Libya’s production recovered rapidly after being virtually shut down during the 2011 revolution. But it has struggled to maintain output near its normal rate due to worker protests at oilfields and terminals. Output is around 1.25mn bpd, down 150,000 bpd from a year ago, according to industry sources. Workers at Libya’s largest oil refinery, Ras Lanuf, have gone on strike, shipping and trading sources said yesterday.
Iraq, last year the world’s fastest-growing oil exporter, has failed to grow its output so far in 2013. Iraqi insurgents are targeting its northern pipeline, while technical problems in the south have also weighed on supply.
Oil exports from Iraq have averaged about 2.25mn bpd so far in July, according to oil shipping figures monitored by Reuters, down 270,000 bpd from shipments of 2.52mn bpd in July 2012. Opec member Iraq’s faltering progress has easing pressure on Saudi Arabia and other Gulf members of the Organisation of the Petroleum Exporting Countries to make big cuts in output to prop up prices, sources in the group say. A further Opec producer, Iran, is also struggling. US and European sanctions over its nuclear programme are keeping its oil output down at around 2.6mn bpd, well below its potential. Iran produced 2.9mn bpd in July 2012, according to the International Energy Agency.
Iranian exports, at about 1.1mn bpd, are about half of their level in early 2012. And a row between Sudan and South Sudan over allegations of rebel support is threatening to close pipelines carrying South Sudan’s oil, taking outages from the four countries towards 1mn bpd.
South Sudan has started to close some of its production, which was most recently estimated at 180,000 bpd. But Sudan last week postponed the shutdown of the pipelines for two weeks to allow more time to end the dispute.
“It lends underlying support,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt of the various outages, although concern about South Sudan has eased. “The situation in South Sudan improved somewhat. So it is not yet clear if they will really shut down production.”
Reported by: The Peninsula, Gulf Times, Reuters, Bloomberg, Qatar Tribute, Caye Global News, BBC News
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