Global oil supply outages jump to 2 mil b/d in June: EIA
More than 2 million b/d of global oil production was disrupted in June, the highest level of unplanned outages since May 2017, the Energy Information Administration said Tuesday as it raised Brent and WTI price projections for this year and next.
EIA sees Brent oil prices averaging $71.80/b in 2018 and $68.74/b in 2019, and WTI averaging $65.95/b in 2018 and $62.04/b in 2019.
A number of uncertainties for global oil supply and demand could keep prices volatile in the near term, EIA said, including the impact of US sanctions on Iranian oil buyers, sharp production declines in Venezuela, conflicts in Libya shutting export infrastructure, and the status of the supply cut agreement between OPEC and non-OPEC producers.
OPEC producers accounted for 1.65 million b/d of the 2 million b/d in unplanned supply disruptions in June, up 300,000 b/d from May. The increase includes outages from conflicts in Libya and higher shut-ins in Nigeria as a result of pipeline disruptions.
Unplanned outages by non-OPEC producers increased to 400,000 b/d in June, up 100,000 b/d from May, with most of that from Canada.
Syncrude Canada’s 350,000 b/d oil sands facility near Fort McMurray, Alberta, is expected to remain offline through at least July after a June 20 power outage, EIA said.
Despite the spike in global unplanned supply disruptions, the outages are not approaching the record 3.6 million b/d set in May 2016, the highest monthly level since EIA started tracking global disruptions in January 2011. Brent prices jumped $5/b that month as a result of disruptions in Canada, Nigeria, Iraq and Libya.
Other highlights of the short-term energy outlook report:
**EIA sees US production averaging 10.79 million b/d in 2018 and 11.8 million b/d in 2019, unchanged from last month’s outlook. US production will top 11 million b/d by October and surpass 12 million b/d by November 2019. “If the forecast holds, that would make the US world’s leading producer of crude,” EIA Administrator Linda Capuano said in a statement.
**OPEC members produced 31.91 million b/d in June, down a marginal 20,000 b/d from May, as declines in Libya, Venezuela and Angola more than offset higher production from Saudi Arabia, the US Energy Information Administration said Tuesday.
**Libyan production fell to 750,000 b/d in June, from 990,000 b/d in May, as clashes closed ports and storage terminals. Venezuelan output sank to 1.36 million b/d in June, from 1.43 million b/d in May. Angolan output fell to 1.49 million b/d in June, from 1.57 million b/d in May. Iran, Nigeria and Equatorial Guinea also had declines.
**Saudi Arabia ramped up output by 350,000 b/d from May to 10.47 million b/d, EIA said. UAE was the only other OPEC member to increase output, EIA said, by producing 2.88 million b/d in June, up from 2.84 million b/d in May.
**EIA sees OPEC production averaging 31.87 million b/d in 2018, down 150,000 b/d from last month’s forecast, and 31.79 million b/d in 2019, down 270,000 b/d from last month.
**Production growth in the US, Brazil, Canada, and Russia will make up the majority of total global supply growth in 2019.
**The report projected OPEC surplus production capacity would average 1.7 million b/d in 2018 and fall to 1.3 million b/d in 2019, which EIA called a relatively low level compared with the 2008-2017 average of 2.3 million b/d. “Low OPEC crude oil surplus production capacity can be an indicator of tight oil market conditions,” the report said. “All of OPEC’s surplus production capacity currently available is in Saudi Arabia, Kuwait, the United Arab Emirates, and Qatar.”
**US net petroleum imports will fall to 1.6 million b/d, a level not seen since 1958, Capuano said. “Net crude oil and petroleum product imports into the United States have continued historic declines in 2018, and EIA’s outlook is that those declines will continue in 2019,” she said. “Net imports are forecast to decrease from 3.7 million b/d in 2017 to 2.4 million b/d in 2018, a year-over-year drop of 35%.”
**US gasoline demand is expected to fall slightly in 2018 and then increase by 0.5% to about 9.4 million b/d in 2019. “If EIA’s projected growth in 2019 is realized, it would be the highest level of annual average gasoline consumption on record, slightly surpassing the previous record set in 2017,” Capuano said.
**June marked the third straight month that Brent oil prices have averaged more than $70/b, EIA said. While Brent prices fell in early June on expectations of OPEC and non-OPEC producers reaching an agreement to increase production, the market turned upward after the late June meeting in Vienna.
**”The price increases possibly reflected expectations by market participants that announced production increases would not be enough to offset falling production levels in Venezuela and Libya, along with the potential for reduced volumes from Iran following the US withdrawal” from the Iran nuclear deal, EIA said.
**US monthly average gasoline prices likely peaked in May and will decline gradually in the coming months to an average of $2.83/gal in September, EIA said. They averaged $2.89/gal in June, down 1 cent from May.
**EIA expects US regular gasoline retail prices to average $2.76/gal in 2018 and $2.77/gal in 2019.