uploads///Supply outage

Crude Oil Supply Outage Could Boost Short-Term Crude Oil Prices


Nov. 5 2015, Updated 8:08 a.m. ET

Crude oil supply outage in OPEC and non-OPEC regions

The EIA (U.S. Energy Information Administration) estimates that the supply outage in OPEC (Organizations of the Petroleum Exporting Countries) regions averaged 2.8 MMbpd (million barrels per day) in 2015. In the non-OPEC region, it averaged 0.74 MMbpd in 2015. However, in the non-OPEC regions the supply disruption is expected to rise in November 2015.

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Syria production

The latest data from the EIA suggest that the Syrian production averaged 34,000 bpd (barrels per day) in early 2015. The civil war in Syria caused the production to fall from 385,000 bpd in 2010 to 34,000 bpd in 2015. The civil war in Syria and the Russian bombing will continue to put pressure on Syria’s production. Libya and Brazil could contribute to 570,000 bpd of the crude oil supply outage. Read the first part of the series to learn how Libya and Brazil are contributing to the supply outage and boosting crude oil prices.

Total crude oil supply outage

The fall in the crude oil production in Syria, Libya, and Brazil could benefit crude oil prices over the short term. Over the long term, crude oil prices are overshadowed by the oversupply concerns. Russia and Saudi Arabia produced more than 10 MMbpd of crude oil in October 2015. The latest consensus from the EIA (U.S. Energy Information Administration) suggests that the gap between supply and demand is at 1.8 MMbpd in 2015. However, it could narrow to 0.78 MMbpd in 2016.

The rise in crude oil prices benefits US upstream players like Chevron (CVX), Continental Resources (CLR), Laredo Petroleum (LPI), and Whiting Petroleum (WLL). ETFs like the iShares US Oil Equipment & Services ETF (IEZ) and the PowerShares DWA Energy Momentum ETF (PXI) are also affected by the ups and downs in the crude oil market.

Read the next part of the series to understand the crude oil price trend.


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