Could we be on the brink of another oil shock?
We raised the suggestion in the closing line of a recent article about oil prices, reporting on alleged negotiations between Saudi Arabia and Russia, but evidence is growing that “management” of the supply market by these two major producers may be the least of the risks we face.
Apart from the most high-profile catalyst to prices of oil (Syria), a host of other areas have deteriorated this year.
OPEC Nightmare: No Peace in Middle East
Refugees fleeing the violence in Syria have flooded into Iraq, second largest producer in OPEC, resulting in a sharp rise in sectarian unrest in that country.
Reuters reported that Libya warned on Monday it will attack and destroy any tanker illegally exporting oil and last week the army fired at a tanker close to the country’s largest crude oil export terminal, which was said to be about to load crude oil that armed protesters blocking the country’s main export ports were attempting to sell illegally.
Several ports in the country’s eastern region have been shut down since the end of July when protests by security guards and oil workers about pay and other political demands led to the closure of many oilfields. As a result, the country’s exports and production are at their lowest levels since the war in 2011, with exports less than 500,000 barrels per day – prior to that exports were at 1.25 million barrels per day.
Nigeria Producing Less Crude Oil
Production has been quietly falling in Africa’s largest producer Nigeria for several years.
The FT reports industrial-scale oil theft, sabotage and technical problems have caused crude oil output to drop to less than 1.9 million barrels a day this summer, the lowest since mid-2009, when production briefly dipped to a 20-year low of 1.5 million barrels per day. Any further fall would allow Angola to assume Nigeria’s position as the continent’s largest crude producer, the paper said.
Theft started with simple tapping of pipelines by disgruntled minorities, but has grown over the years to the point where illegal refiners are run on the proceeds. Now more than 150,000 barrels are stolen every day, either being shipped to refiners in the Niger basin or overseas to Asia. The Nigerian state is said to have lost $10.9 billion between 2009 and 2011 to theft and sabotage, with no prospects of production being restored to earlier levels.