Leaks, Disruptions Reduce Global Oil Glut

Leaks, Disruptions Reduce Global Oil Glut
Leaks, Disruptions Reduce Global Oil Glut

Pipeline leaks and shipping disruptions are doing more to reduce the global oil glut than producers who have so far failed to agree on whether to cap output.

Outages from Iraq and Nigeria have disrupted more than 800,000 barrels a day of supply and tightened the Brent market, according to Citigroup Inc.

This coincided with a 20% jump in Brent prices toward $40 a barrel since a proposed production cap from Saudi Arabia and Russia captivated the market and helped turn sentiment bullish, Bloomberg reported.

“Actual disruptions and cuts we’re seeing in the background are largely going unnoticed,” said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “US supply is declining and we’re seeing other little disruptions occur here and there. Those types of things are slowly chipping away at the surplus.”

The pipeline disruptions in Iraq and Nigeria are temporary and production is expected to go back on stream, returning more supply to the market.

But damage to a pipeline in Iraq affected about 630,000 barrels a day of supply, according to a March 14 note from Citigroup. Disruptions continue, even after its repair.

Exports from Kirkuk to the Turkish port of Ceyhan halted on oil ministry orders, hours after pumping resumed following a prolonged shutdown.

Nigerian daily exports next month are scheduled to be the lowest since Nov. 2013. Loading at the Forcados facility was halted after a leak was discovered Feb. 14, according to the operator Royal Dutch Shell Plc.

The shutdown cut oil production by 300,000 barrels a day and repairs could take as long as eight weeks.

US crude output also slipped more than 150,000 barrels a day since January, as drilling rigs targeting oil fell to the lowest since December 2009.

Production outside OPEC will drop by 750,000 barrels a day this year, or 150,000 barrels a day more than estimated last month, the IEA said.