Supply Disruptions | Russell T. Rudy Energy LLC
“World Oil” reports that Australia and New Zealand Banking Group Ltd. (ANZ) sees supply disruptions sustaining the recent recovery in crude oil prices.
With almost 2.5 million barrels of oil per day (MMbopd) removed from the global supply stream, and sustained demand, ANZ is currently bullish on oil. In fact, analyst Daniel Hynes thinks that the market has yet to factor in the effect of lower production and that prices will only increase as this is taken into account. He observes, “The fact that oil hasn’t pushed through $50/bbl suggests the market is discounting the impact of the disruptions. As these issues linger on, we expect an increasing supply risk premium will price into the market.”
Oil production has been disrupted in several locations across the globe. U. S. shale production is down due to low prices and falling rig counts. Wildfires in Canada have significantly curtailed oil sands output. In Nigeria, rebels are blowing up pipelines in the mangrove swamps of the Niger River Delta, reducing output to its lowest level in almost three decades.
OPEC member, Venezuela, stands to lose a significant portion of its 2.5 MMbopd production. Political upheaval, a worsening drought, and diminished cash flow from lower prices have all plagued the country. Halliburton and Schlumberger have cut back on operations in the country due to lack of payment. This, in turn, will only further compromise production.
Even Goldman Sachs sees the global oil glut shrinking and prices firming. Up until now refiners have been able to use stockpiles of crude to sustain operations. However, the bank contends that as these are drawn down, prices will likely respond.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/5/19/oil-rally-seen-having-more-to-go-as-millions-of-barrels-are-lost .
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