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Page added on June 9, 2014
OPEC Struggles to Cope With Libyan Oil Shortfall
Six months ago, one of OPEC’s concerns was whether a U.S. shale boom might upend crude markets by providing too much oil. Today, the group of some of the world’s largest producers has a more short-term worry: How to compensate for lost Libyan crude at a time of rising demand and tensions between Russia and the West.
“That’s the big question: Who will fill the gap left by Libya?” said one delegate within the group, which meets in Vienna later this week to discuss its output. Members of the Organization of the Petroleum Exporting Countries—which produces one out of every three barrels of oil consumed daily in the world—are facing calls by some to boost output to help plug the gap left by fellow member Libya.
OPEC isn’t expected to raise its overall output at its meeting this week, according to delegates. But individual members, including Saudi Arabia, Kuwait and the United Arab Emirates, may start pumping more unofficially, these delegates said. The big question is by how much.
The International Energy Agency, an energy watchdog for the world’s most industrialized countries, recently said the cartel will need to boost production by 800,000 barrels a day in the second half of this year. That is roughly the equivalent to what Libya pumped last year, and about half of the country’s overall capacity.
For much of this year, however, flows of Libyan oil have been hobbled by strikes, protests and conflicts between rival factions. With many ports currently blocked by rebels to the east of the country, and oil fields shut by protesters in the west, Libyan output is hovering at just 160,000 barrels a day. Many of the issues that have hampered output there had been considered temporary. But the longer they persist, the more other OPEC members view them as longer-term barriers to a full resumption of Libyan output.
“Libya isn’t seen resolving itself,” another OPEC official said.
The shortfall comes as global growth forecasts are climbing. The IEA, for instance, sees faster-than-expected global growth—and lower-than-expected production outside OPEC. That translates into a boost in global demand for OPEC crude of nearly one million barrels a day since October 2013, data from the agency shows.
Filling the gap left by Libya could be a tall order. Over the past five months, OPEC’s production has been stuck below its agreed ceiling of 30 million barrels a day. Iran is still hobbled with U.S. and European sanctions that have kept its output significantly under its quota. Arab producers, including Saudi Arabia, the world’s biggest exporter, haven’t yet stepped in to give the cartel a significant boost.
A Saudi oil official said that “OPEC and Gulf countries, including Saudi Arabia, stand ready to meet any gap in the market.” Saudi still has significant unused capacity. But if it were to step in unilaterally to fill the Libyan gap, it would cut that so-called swing capacity significantly, giving it less room to react to any other production disruption or demand boost.
Moreover, OPEC producers are using more of their own oil, making less of it available to help cushion global markets. Saudi Arabia’s domestic oil consumption is expected to be 12% higher this year than in 2011.
Libya will “remain a phantom menace hanging over oil markets for at least the remainder of 2014 and likely into 2015,” analysts at Barclays Bank PLC wrote earlier this month.
10 Comments on "OPEC Struggles to Cope With Libyan Oil Shortfall"
bobinget on Mon, 9th Jun 2014 10:35 am
“Who will fill the gap left by Libya?”
Iran is exceeding it’s export limits today.
The White House has announced that while negotiations are underway the US is suspending oil sanctions against Iran due to the fact that the Islamic republic is cooperating with the international community to dispel fears regarding its controversial nuclear effort.
“The United States has committed to pause efforts to further reduce Iran’s crude oil sales for a six-month period under the Joint Plan of Action between the P5+1 and Iran,” White House Press Secretary Jay Carney stated.
Read more: http://voiceofrussia.com/news/2014_06_05/US-suspends-Iran-oil-sanctions-while-Tehran-exceeds-crude-export-quota-1469/
Despite a brewing civil war Iraq: three hours ago:
(Reuters) – A full lifting of sanctions on Iran could spark new rivalries within OPEC as Tehran seeks to reclaim its rank as No. 2 producer from former foe Iraq.
The two neighbors both aim to expand supplies in the next few years, which could make life difficult for the Organization of the Petroleum Exporting Countries if surging output from outside the group forces OPEC to consider cutbacks.
Baghdad got off to a galloping start this year, ramping up production to 3.4 million barrels per day (bpd) and lifting exports to a record 2.8 million bpd in February, nailing its position as OPEC’s second-biggest producer behind Saudi Arabia.
“It’s a race for capacity. They may be neck and neck for the next few years, but my money is on Iraq pulling away from a trailing Iran,” said Peter Wells of geological consultancy Neftex, who has worked in Iran.
Deteriorating security has reversed early gains, but Iraqi output of around 3.2 million bpd is still up on 2013 and Baghdad is targeting about 4 million by year-end including the autonomous northern Kurdish region.
Aaron on Mon, 9th Jun 2014 10:41 am
What’s the betting that we see the Iranian nuclear issue conveniently settled sometime in the next 6 months?
Plantagenet on Mon, 9th Jun 2014 10:55 am
Would it help if Obama bombed Libya again and helped overthrow their government a second time?
Northwest Resident on Mon, 9th Jun 2014 10:56 am
“…one of OPEC’s concerns was whether a U.S. shale boom might upend crude markets by providing too much oil…”
What a joke. I seriously doubt that even one OPEC oil exec lost a single minute of sleep worrying that the “U.S. shale boom might upend crude markets by providing too much oil.”
The American “shale boom” if nothing else is and has always been a false narrative intended to buy time — to keep BAU grinding onward for a little while longer. OPEC guys must surely know this and are most likely in on the “act”.
But worrying about “too much oil” from American shale production? The entire membership of OPEC must be rolling on the floor and laughing at the thought.
westexas on Mon, 9th Jun 2014 11:44 am
Why isn’t Saudi Arabia a threat to fracking, by unleashing millions of barrels of oil per day on the market?
It appears very likely that 2013 was the eighth year in a row that Saudi net oil exports were below their 2005 rate, versus a very rapid increase in net exports from 2002 to 2005.
shortonoil on Mon, 9th Jun 2014 12:59 pm
2012 was the year that petroleum passed the half way point. During 2012 it required one half of the energy that came from a barrel of oil to produce the oil (extract, process, and distribute). That number is growing by about 3% per year. Each year the oil producing nations will consume a larger, and larger portion of their own production in the process of producing it. They can no longer increase production, we have passed thermodynamic peak.
The Libyan fields have the same problem that all water drive conventional fields have. Once the pressure is released on the field, the water front falls to the bottom of the oil seam, and flows to the producer. It is called premature breakthrough, and all or some of those fields are probably now permanently damaged. OPEC can not makeup the loss with any fields they are now pumping. Libya had light sweet crude; Iran has heavy sour fields. Libya’s customers do not have the refinery setups to process it. At least part of the Libyan production is now permanently lost to the world.
http://www.thehillsgroup.org/
rockman on Mon, 9th Jun 2014 2:48 pm
I didn’t bother reading beyond the title. LOL. Let me rewrite it for them:
OPEC Struggles to Cope with Income Almost Doubling from $0.66 TRILLION/YR to $1.15 TRILLION/YR
And that’s just since 2009.
Kenz300 on Mon, 9th Jun 2014 7:45 pm
Second generation biofuels made from cellulose, algae or waste can be produced locally providing local jobs and local energy.
Why worry about OPEC and BIG OIL when local energy production is more reliable.
As the price of oil continues to rise energy efficiency and alternatives look to be better long term solutions.
Makati1 on Mon, 9th Jun 2014 9:27 pm
The Saud family is sweating heavily as they are dependent on their oil sales to continue and the price to remain high. Their monarchy demands it to pay off their citizens. They want Iran under their thumb so they can control oil sales and keep the price as high as possible without crashing the world economy. Too bad that they are losing the fight. NOT!
Summer is getting hotter.
Henry Larry on Thu, 25th Apr 2024 1:23 am
The delicate balance of global oil production is clearly under strain with Libya ongoing issues. It seems like OPEC will need to navigate carefully to stabilize markets without sacrificing their own capacities.
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