Home / Oil & Energy / Oil & Companies News / Oil prices brush off Saudi attack, but OPEC spare capacity concerns rise

Oil prices brush off Saudi attack, but OPEC spare capacity concerns rise

Less than a month after the attack on Saudi Aramco’s Abqaiq facility, global oil prices and output have more than rebounded from the attack, but concerns have grown over the fragility of global spare production capacity, the US Energy Information Administration said.

“The long-term effects from the disruption remain highly uncertain,” EIA said in its monthly Short-Term Energy Outlook. “The attack revealed vulnerabilities to a significant amount of crude oil production in a country that holds most of the spare production capacity within [OPEC].”

The September 14 attack, which disrupted an estimated 5% of global liquid fuels supply, caused OPEC spare crude capacity to fall to 1.23 million b/d in September from about 2.23 million b/d in August, EIA said. EIA forecasts OPEC spare capacity to return above 2 million b/d by January.

Saudi oil production fell to 8.5 million b/d last month from 9.85 million b/d in August due to the attack. EIA estimates Saudi crude oil output returned to pre-outage levels as of October 3.
PRICES

EIA sharply lowered its oil price outlook for early next year, as it sees increasing uncertainty about economic and oil demand growth more than offsetting the higher risks of supply disruptions after the Saudi attack.

EIA cut its Brent outlook by $5.31/b for the second quarter of 2020 to $56.69/b. It sees Brent averaging $59.36/b in Q4 2019 and $58/b in Q1 2020, down 97 cents/b and $4/b, respectively, from last month’s outlook.

“Despite the recent increase in supply disruptions, EIA expects downward oil price pressure to emerge in the coming months as global oil inventories rise during the first half of 2020,” EIA said.

EIA now expects Brent to average $63.37/b in 2019, down 2 cents/b from last month’s outlook, and average $59.93/b in 2020, down $2.07/b from last month’s outlook.

WTI is expected to average $53.86/b in Q4 2019, $52.50/b in Q1 2020 and $51.19/b in Q2 2020, down 97 cents/b, $4/b and $5.31/b, respectively, from last month’s outlook.

EIA now sees WTI averaging $56.26/b in 2019 and $54.43/b in 2020.
SUPPLY

OPEC oil output averaged 28.23 million b/d in September, down 1.55 million b/d from August and the lowest level for OPEC production since November 2003, EIA said.

OPEC crude output in September fell nearly 4 million b/d year on year, EIA said. EIA estimates OPEC output will average 29.83 million b/d in 2019, down 2.1 million b/d from 2018, and fall to 29.62 million b/d in 2020.

Oil production in Venezuela fell to 650,000 b/d in September, down 100,000 b/d from August and less than half of what the country was producing a year ago.

Iranian oil production average 2.1 million b/d in September, where it has been since July, EIA said.

US oil production growth will pick up in Q4 2019 on an uptick in the Gulf of Mexico and as Permian pipelines start carrying more barrels to the Texas Gulf Coast, EIA said. This follows relatively flat output for the first seven months of the year because of disruptions to offshore drilling platforms and slowing growth in tight oil plays.

EIA sees US oil production hitting 13 million b/d for the first time in December, two months earlier than it forecast in last month’s report.

Looking into 2020, EIA forecasts US oil production growth will level off because of falling crude prices in the first half of the year and continuing declines in well productivity.

US oil production is expected to average 12.26 million b/d in 2019, up 20,000 b/d from last month’s outlook, and 13.17 million b/d in 2020, down 60,000 b/d.

EIA still sees the US flipping to a net petroleum exporter for the first time on a monthly basis in October, with total crude and product exports exceeding imports by 180,000 b/d.

The US will become a net oil exporter on an annual basis for the first time in 2020, with total exports exceeding imports by 620,000 b/d, EIA said. Net oil imports averaged 2.34 million b/d in 2018 and are expected to average 530,000 b/d in 2019.
Source: Platts

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping