Oil Supply Crunch Will Test OPEC Spare Capacity

Oil production capacity could fall to under one percent of global oil demand by the end of the year if OPEC compensates falling production from Iran and Venezuela, leaving oil prices exposed to sharp swings in the event of unplanned outages, analysts say.
Spare capacity is the extra oil a producing country can sustain at short notice, providing global markets with a cushion in the event of natural disaster, conflict or any other cause of an unplanned supply outage, Reuters reported. 
Very few oil producers hold spare capacity, with Saudi Arabia, the largest producer in OPEC, and the world’s biggest oil exporter, holding the lion’s share. 
As the oil market faces major supply crunches this year, largely due to US-imposed sanctions on OPEC’s Iran and Venezuela, analysts say there is enough spare capacity to compensate for their lost production. 
Production from the two countries has already fallen by a combined 1.85 million bpd from 2018 peaks, according to Reuters estimates, but production is expected to fall further, especially in Iran. 
While analysts expect Venezuelan production to more or less stabilize at current levels of around 700,000-800,000 bpd for the rest of the year, Iranian oil production is forecast to fall further as the US seeks to completely choke off its exports. 
“Iran is around 2.5 million bpd right now and we see it down to around 2 million bpd by the end of the year,” Energy Aspects geopolitical analyst Riccardo Fabiani said. 
Goldman Sachs forecasts that Iran exports will stabilize at 400,000 bpd, 900,000 bpd lower than April levels.