• 4 minutes China 2019 - Orwell was 35 years out
  • 7 minutes Wonders of US Shale: US Shale Benefits: The U.S. leads global petroleum and natural gas production with record growth in 2018
  • 11 minutes Trump will capitulate on the trade war
  • 14 minutes Glory to Hong Kong
  • 3 hours China's Blueprint For Global Power
  • 2 hours Bloomberg: shale slowing. Third wave of shale coming.
  • 8 hours Boring! See Ya Clowns, And Have Fun In Germany
  • 49 mins ABC of Brexit, economy wise, where to find sites, links to articles ?
  • 2 hours Yesterday Angela Merkel stopped Trump technology war on China – the moral of the story is do not eavesdrop on ladies with high ethical standards
  • 7 hours USA Carried Out Secret Cyber Strike On Iran In Wake Of Saudi Oil Attack
  • 13 hours Crazy Stories From Round The World
  • 11 hours the future
  • 8 hours 5 Tweets That Change The World?
  • 7 hours Spain Is On The Edge...Clashes Between Catalonia And "Madrid"
  • 8 hours Leftists crying to make oil patch illegal friendly: 'Broken system' starves U.S. oil boom of immigrant workers: CONGRESS DO YOUR JOBS INSTEAD OF PANDERING!
  • 13 hours Climate Protesters Blocking Roads etc...
Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

Oil Still At Risk Of Geopolitical Turmoil

There is no shortage of surprises in the world of oil. Nobody anticipated the rush of oil supplies that would come online in such a short time from US shale over the last few years. The unexpected surge in supplies led to the crash in prices.

But surprises can go in the other direction. They normally take the form of an unanticipated geopolitical conflict. And despite the ongoing surplus in oil output, supply disruptions are taking their toll on production around the world. Related: Top 4 Oil Companies For Dividend Investors

Let’s take a look a few recent incidents.

In the Gulf of Mexico an oil platform was forced to shut down on May 22 after a piece of equipment caught fire. The platform was small, producing only 2,200 barrels per day, but 28 workers had to be evacuated and brought to shore.

Another safety incident occurred a few days earlier when Plains All American pipeline ruptured in Santa Barbara, spilling oil into the Pacific Ocean. The oil marred the coastline and harmed wildlife. While not an upstream project, the flow of 50,000 barrels per day through the pipeline will be offline until it is fixed.

In Libya, the eastern government recognized by the international community conducted an airstrike on a fuel tanker sitting just off the coast. The tanker was preparing to unload its 30,000 metric tons of fuel for a power plant, but the eastern government may have thought the tanker was being used to carry rival militants. The tanker caught fire, but fortunately was extinguished.

In South Sudan, things are no better. Rebels are targeting some of the last remaining fields still producing oil. The country is only producing about 165,000 barrels per day, a decline of about one-third since fighting began a year and a half ago. The economy is in crisis and the violence shows precious few signs of abating. Related: E.U. Could Provide Push U.S. Needs To Lift Energy Export Limits

In Nigeria, the surprise supply event has been downstream. A strike by oil-tanker drivers has led to shortages of refined products. Gas stations have closed, traffic is reportedly down, flights have been cancelled, and businesses have been negatively impacted. A shortage in fuel supplies is worsening by the day.

In Canada, forest fires have put oil sands operations in their crosshairs. Cenovus Energy Inc. was forced to shut down a site that produces 130,000 barrels per day as the fires moved in. A few other companies nearby also took its operations offline. The fires have cut off 9 percent of Canada’s oil sands.

A few weeks ago Chevron announced that it would take a major oil field offline in Kuwait for maintenance. The Wafra facility has the capacity to produce about 220,000 to 250,000 barrels per day of heavy crude. The field could be kept offline for longer than expected due to red tape stemming from a border dispute. The fields are located along the Saudi-Kuwait border, and are jointly operated by the two countries. Before Wafra, the Khafji oil field, which has a capacity to produce a quarter of a million barrels per day, was taken offline in October, likely for similar reasons. Related: Oil Markets Can’t Ignore The Fundamentals Forever

The examples above are just incidents that took place in May, and is likely not comprehensive. Since 2013, the world has routinely seen roughly 3 million barrels per day offline at any given time due to unexpected circumstances. In the past, before the US ramped up oil production in dramatic fashion, prices would spike from geopolitical tension, often adding a few dollars onto a barrel of oil. Prices would even spike before actual production was lost, with a risk premium added just because there was a possibility that oil would be knocked offline.

For now, these geopolitical events are not having much of an effect, due to the supply overhang. But it is important for oil market watchers to keep in mind that these supply disruptions have not gone away and are still occurring with an alarming frequency. If and when oil markets rebalance, any one of the examples listed above could cause prices to jump.

By Nick Cunningham Of Oilprice.com

 

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play