Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

The 5 Countries That Could Push Oil Prices Up

Commodities / Crude Oil Oct 25, 2017 - 06:18 PM GMT

By: OilPrice_Com

Commodities

Oil prices appear to be stuck in the $50s per barrel, but that doesn’t mean there aren’t serious supply risks to the market.

An unexpected disruption could occur at any moment, as has happened in the past, leading to a sudden and sharp jump in prices. Geopolitical tension has been largely irrelevant since the collapse of oil prices in 2014, but it’s making a return now that cracks have emerged in some key oil-producing nations. The threat of an outage will carry more weight as the oil market tightens.


"The 'Fragile Five' petrostates—Iran, Iraq, Libya, Nigeria and Venezuela—continue to see supply disruption potential, with northern Iraq crude exports at risk due to an escalation of tensions between the (Kurdistan Regional Government), Baghdad and Turkey, while the United States has decertified the 2015 Iran nuclear deal," U.S. bank Citi said.

Indeed, five prominent oil-producing nations are beset with challenges, for varying reasons, all of which could spring a surprise on the oil market without any advanced notice.

Iraq. The most near-term supply risk comes from Iraq. The surprise seizure of Kirkuk’s oil fields by the Iraqi government has already disrupted some oil shipments. The Bai Hassan and Avana oil fields near Kirkuk remained shut as of October 19, keeping at least 275,000 bpd offline. The outages are expected to be temporary; a source told Reuters last week that they’re seeking certain equipment to bring the fields back online. An agent at the Turkish port of Ceyhan—the destination for Iraq’s northern oil exports—told Bloomberg that flows fell to 196,000 bpd as of October 19, implying an outage of about 400,000 bpd. Iraq represents the most obvious near-term threat to global supplies, but because the bulk of the country’s output is located in the south, far from the unrest, the potential outage is likely capped at 600,000 bpd, and would probably be temporary.

Iran. This one’s probably the biggest question mark on this list, and is in a much stronger position than its more fragile peers. The danger to Iran is a return of U.S. sanctions, which are by no means a given. Even then, it’s unclear if the U.S. has the ability to curtail Iranian oil exports. It might scare away new investment, but even U.S. Secretary of State Rex Tillerson went to lengths recently to assure European officials that it wouldn’t block business between European companies and Iran. Goldman Sachs estimates that in a relatively worst-case scenario of a return of U.S. sanctions, a few hundred thousand barrels of oil exports would be at risk—not the more than 1 mb/d of disrupted exports due to sanctions before the nuclear deal. At this point, though, potential outages are too hypothetical to be taken seriously. Iran probably won’t pose a supply risk to the market, at least not this year.

Libya. The North African OPEC member was exempted from the OPEC deal, and for much of the past year has represented a downside risk to oil prices, not an upside one. That is because it has nearly tripled its output from about 300,000 bpd in August 2016 up to about 850,000 bpd currently, down a bit from a recent peak at over 1 mb/d. But damage to some export terminals likely means that near-term production has a ceiling at about 1.25 mb/d, meaning Libya won’t be able to bring output back to pre-war levels of 1.6 mb/d. But because current output is now taken for granted and already baked into global pricing calculations, Libya now represents a supply risk to the market because an outage is entirely realistic due to ongoing instability. The country is nearing its ceiling for production, while there’s plenty of room for it to fall back.

Nigeria. The story here is similar to Libya. It was also exempted from the cuts because violence and instability previously knocked a sizable portion of output offline. But Libya’s restoration of output coincided with a similar reduction in violence in the Niger Delta. A ceasefire brought calm for much of the past year, allowing production to rebound from a low point of 1.2 mb/d last year, back up to 1.8 mb/d currently. Potential for further output gains is probably limited, not least because the country promised to limit production when it hit 1.8 mb/d. Meanwhile, peace in the Niger Delta remains fragile, and reports that militants have grown frustrated with the pace of talks with the government raises concerns about a return to violence. The rebound in Nigerian production is not assured.

Venezuela. The unfolding implosion of Venezuela almost ensures that more of the country’s oil production will erode, perhaps at a quickening pace. As of September, Venezuela only produced 1.89 mb/d, down from 3.2 mb/d in the late 1990s, but also down from nearly 2.4 mb/d as recently as 2015. Without cash, state-owned PDVSA can’t invest in new production and can’t even invest in maintenance to keep existing production from falling. Reports have surfaced suggesting that even the oil that is produced is suffering from declining quality, as PDVSA doesn’t have the means to properly treat its heavy crude. Worse, with huge debt payments coming due in the next few weeks, a debt default is possible. All of this adds up to a further deterioration in the country’s oil output.

Source: https://oilprice.com/Geopolitics/International/The-5-Countries-That-Could-Push-Oil-Prices-Up.html

By Nick Cunningham of Oilprice.com

© 2017 Copyright OilPrice.com - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules