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Libya, Iraq seen as growing risk to oil markets

11.14.2013  | 

Crude prices may “come under renewed upside pressure” as refiners returning from seasonal maintenance eat into supply already curtailed by unrest in Libya and Iraq, the IEA said in its monthly market report.

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By GRANT SMITH
Bloomberg

Supply losses in the Middle East and North Africa may offset rising shale oil output and push prices higher next year, the International Energy Agency said.

Crude prices may “come under renewed upside pressure” as refiners returning from seasonal maintenance eat into supply already curtailed by unrest in Libya and Iraq, the agency said Thursday in its monthly market report. 

The IEA slightly increased estimates for global oil demand in 2014, and for production from outside the Organization of Petroleum Exporting Countries, resulting in a “comfortable” balance for early next year.

“Production problems in Libya and Iraq, among others, continue to relentlessly fester, and may prove more market- supportive in a context of rising demand than they have been during the recent” refinery overhaul season, the Paris-based adviser to 28 nations said.

Brent futures have slipped 3.1% this year to trade at about $107.70/bbl in London today, as protests in Libya and instability in Iraq are balanced by a muted recovery in Europe and signs of slowing economic expansion in emerging economies. Booming shale output will make the US the world’s biggest oil producer by 2015, the IEA said in a separate report yesterday.

Faster growth

The agency’s increase of estimates for world oil consumption in 2014, by 20,000 bpd, left its forecast for growth unchanged from last month. Global fuel use will expand by 1.1 million bpd, or 1.2%, to 92.1 million bpd next year, an acceleration from this year as the economic recovery gathers momentum.

The IEA also raised projections for supplies from outside OPEC in 2014, by about 100,000 bpd, to reflect stronger-than-expected growth in the US and Russia. Non-OPEC production will expand by 1.8 million bpd to 56.5 million bpd next year. Last month the agency described this rate of growth as the highest since the 1970s.

Rising non-OPEC output mean that the amount of crude required from the 12-member group, which controls about 40% of global supplies, will decline next year, the report showed. The call on OPEC will fall to 29.1 million bpd in 2014, from 30 million this year. That’s about 800,000 bpd less than the organization pumped last month.

OPEC decline

Production from OPEC slipped about 100,000 bpd to 29.89 million bpd in October as Saudi Arabia, the biggest member, reduced output in line with lower seasonal domestic demand, according to the IEA. The Gulf kingdom trimmed output last month to 9.75 million bpd, from 10.12 million, ending a three-month spate about 10 million, the report showed.

Exports of crude from Iraq will probably remain below capacity until the end of the first quarter next year because of worsening security in the Basra region and bottlenecks at the country’s Persian Gulf terminals.

While Libyan production rose by 50% month-on-month to 450,000 bpd in October, it had slipped back to 250,000 bpd by early November amid worsening political turmoil and labor disputes, the IEA said.

The creation of an independent oil company to control crude sales by armed militia controlling areas of eastern Libya “was seen as largely symbolic, since there is little chance oil traders would engage with the tribal groups,” the IEA said.

Supply target

OPEC is expected to keep its supply target unchanged at 30 million bpd when officials assemble in Vienna on Dec. 4, the IEA said, based on comments from several ministers.

OPEC’s own secretariat similarly characterized markets as “well-supplied” in its monthly market report yesterday. The group’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

“We have a fairly balanced market in 2014, with non-OPEC supply growth matching demand growth,” Amrita Sen, chief oil market strategist at Energy Aspects Ltd. in London, said before the report. “The call on OPEC crude falls slightly. Our outlook for prices in 2014 is that they’ll be lower than this year, but stable and still high. There is upside risk for the demand outlook given the improvement in the macroeconomy.”

European refinery processing rates declined in September to the lowest in more than 22 years on low profitability and seasonal maintenance, the IEA said. Preliminary data for October may show that processing in the region has decreased to the least since 1989, the agency said.

Total inventories of crude and refined products in industrialized nations are closer to their five-year average after increasing by 8.6 million bbl in September, a month when they normally decline, to 2.7 billion bbl, the IEA report showed. That reduced the deficit in stockpiles compared with their average to 42.9 million bbl, from 67 million.



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Brad ONeal
11.15.2013

Not mentioned in the article as a driver of oil price increase is all the money printing by the Federal Reserve to monetize the government debt and keep the overextended big banks afloat.

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