The OPEC allows for consumer calls to pump more crude, but this only makes the oil market more nervous.
The reassuring assurances that came out of Saudi Arabia's promise last week to lead a substantial increase in production was swept away on Tuesday as the harsher US sanctions on Iran refocused the country. Attention on the global reserve of crude oil urgently.
"Reducing OPEC's spare capacity" leaves the "price risk more exposed upward," said Brian Singer, managing director of Goldman Sachs Group Inc.
Who has the juice?
Only a few countries have significant additional production capacity
Source: International Energy Agency
The inactive oil fields that the Organization of Petroleum Exporting Countries and its allies – mainly Saudi Arabia – can deploy in case of emergency have a total capacity of about 3.4 million. barrels a day, according to the International Energy Agency.
These reserves will be reduced as the group implements the strengthening of the supply of 1 million barrels per day. in Vienna last week. Saudi Arabia's plan to increase production to a a record 10.8 million barrels a day next month consume about 40% of its unused capacity, leaving the world a buffer equivalent to only 2.6% of the world supply.
This would limit OPEC's ability to respond to other disruptions – and there will be many more to come. Venezuela's production is expected to decline further as its economic crisis worsens. Earlier this month, Libya lost unexpectedly 400,000 barrels a day of production while a militia was attacking two key oil terminals, prompting another armed group to take control of part of the country's industry.
"This leaves us virtually without capacity, at a time when Iran is not the only problem," said Amrita Sen, chief oil analyst at Energy Aspects Ltd., during a press conference. a televised interview with Bloomberg. "The fall of Venezuelan production, Angola, Libya, Nigeria – there are many problems all over the world."
Washington's pressure for US allies to completely stop buying Iranian crude by November could take another 1.5 million barrels a day in the market, according to Energy Aspects Ltd., a consultant.
Record breaker
Saudi Arabia plans to pump record amount of crude oil in July
Source: JODI, OPEC
The dilemma of OPEC was evident in the price fluctuations on the crude oil markets on Tuesday. US futures markets have announced that Saudi Arabia is forecasting a sharp increase in production, to then break the $ 70-a-barrel mark for the first time in a month after the US state department has revealed all the pressure that he intended to apply to the Iranian oil industry.
Earlier this month, the International Energy Agency said the combined production of Venezuela and Iran could dive an additional 30% – or around 1.5 million barrels a day – by the end of next year. That was before the US announced restrictions on Iranian exports that were tighter than most analysts expected.
Even though OPEC and Russia are offsetting this additional loss of 1.5 million barrels a day, the market will still be "finely balanced" in 2019, the IEA said. By the end of next year, the available buffer capacity could decrease to the lowest in three years, predicts the agency.
This represents a significant risk to the security of the global energy markets in the event of sudden and unexpected increase in demand or supply, said Mr Goldman's Singer. Banks on Wall Street and elsewhere have said that they continue to see prices climbing because of the decrease in the cushion.
Price increase
Bank of America Corp. predicts that Brent, the global benchmark, will grow to $ 90 a barrel in the second quarter of next year, while UBS Group AG expects between $ 80 and $ 85 in the second half. Both banks cited the limited reserve production capacity as the reason for the increase in price forecasts.
Brent futures traded at $ 76.67 a barrel in London at 9:19 am local time on Tuesday.
The IEA noted that higher prices have already "raised doubts about the strength of growth in demand". In June, the agency reduced its estimate of the projected increase in global oil consumption this year from 100,000 barrels per day to 1.4 million barrels per day. Yet, next year, he expects the same level of growth, which is above the long-term trends.
"When you do the barrel-math and you look at the risk of supply there, clearly the situation currently on the market is still very constructive for oil prices," said Harry Tchilinguirian, director of strategy BNP Paribas SA market an interview on Bloomberg television.
– With the help of Francine Lacqua
(Updates with analyst comments in the seventh paragraph.)
