PAJ president: oil supply disruption in Libya, Iraq could be offset by OPEC output
Oil supply disruptions in Libya and Iraq could be offset by increased output from OPEC, limiting the impact on global oil markets, the head of the Japanese petroleum industry said.
“Oil prices may fluctuate due to the latest incidents, but we don’t have to worry about too much about demand and supply balance as OPEC can cover shortfalls (from Libya and Iraq),” Takashi Tsukioka, president of the Petroleum Association of Japan (PAJ), told a news conference.
Two major oilfields in southwest Libya began shutting down on Sunday after forces loyal to Khalifa Haftar closed a pipeline, potentially reducing national output to a fraction of its normal level, the country’s National Oil Corporation (NOC) said.
The market impact from Libya is expected to be short-lived, Tsukioka said.
He also said there was a report of an Iraqi oilfield suspending operations due to labour issues, without giving further details.
Bloomberg reported that work at an oilfield in Iraq was temporarily halted on Sunday and supply from a second production site was at risk as widespread unrest escalated in one of OPEC’s biggest producers.
Tsukioka, who also serves as chairman of Idemitsu Kosan , said Japanese refiners could buy oil from the shared oilfields between Kuwait and Saudi Arabia having used oil from the area in the past.
Kuwait and Saudi Arabia agreed last month to end a five-year dispute over the shared Neutral Zone in a deal which will allow production to resume at two oilfields that can pump up to 0.5% of the world’s oil supply.
Under International Maritime Organization (IMO) rules, ships, from this month, must use fuel with a sulfur content of just 0.5% – down from 3.5% – or install devices known as scrubbers that strip out the toxic pollutant.
“IMO-compliant marine fuels have been supplied smoothly since late last year,” Tsukioka said, adding that Japanese refiners were aiming to maintain a stable supply.
Prices for gas oil and low-sulfur fuel oil have held at higher-than-normal levels, while gasoline, naphtha and high-sulfur fuel oil prices have been hovering at lower levels, he said.
“But our refinery margins have not been affected much,” he said, adding that they are closely watching market developments.
Source: Reuters (Reporting by Yuka Obayashi; Editing by Kim Coghill; Editing by Kirsten Donovan)