Monthly Oil Supply Disruptions Surge on Coronavirus and Middle East Tumult, EIA Says
Political instability, sanctions, hurricanes and the coronavirus pandemic intersected and sent oil production outages soaring this year, new federal data show.
Disruptions to crude oil and condensate production were up among members of both the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries through September, the U.S. Energy Information Administration (EIA) said Tuesday.
“These outages have contributed to reduced liquid fuel supply and, along with crude oil production declines agreed to among OPEC and partner countries (OPEC-plus), have contributed to global liquid fuels inventory draws since June,” EIA said.
Through the first nine months of 2020, monthly oil supply disruptions averaged 4.6 million b/d and peaked at 5.2 million b/d in June. That marked the highest monthly average since 2011, when EIA started tracking monthly liquids production outages. In 2019, monthly oil disruptions averaged 3.1 million b/d.
EIA noted that it does not include field closures for economic reasons or oil demand declines in its accounting of supply disruptions.
The agency said lofty levels of unplanned outages in Iran and Venezuela factored significantly into the year/year increase. As a result of ongoing U.S. sanctions on Iran’s crude oil and condensate exports, disruptions there have increased by 100,000 b/d since January. U.S. sanctions also caused outages in Venezuela, removing more than 500,000 b/d of crude oil production from global markets this year.
Civil war in Libya, meanwhile, removed about 1.2 million b/d from oil production since February, EIA said.
“The Libyan National Army, the warring faction in eastern Libya, blockaded five of the country’s oil export terminals and shut in oil production from major fields in the southwestern region in January 2020, causing Libya’s production to fall to less than 100,000 b/d by April,” researchers said.
Outside of OPEC countries, oil supply disruptions have reached 800,000 b/d this year, with the United States and Canada accounting for the vast majority of the total.
In the United States, EIA said, hurricanes and unplanned maintenance hindered oil production this summer. In Canada, disruptions developed after operators ordered nonessential staff to stop work because of coronavirus outbreaks.
In addition to the outages, OPEC-plus called for a cut to oil output that began in May and gradually tapers through April 2022. The Saudi-led oil cartel initiated the limits in response to the demand destruction and downward pressure on prices caused by the pandemic last spring.
EIA data show that total crude production decreased by 6.0 million b/d from April to May as a result of the deal, marking the largest monthly decline since 1993. Compared with January 2020 total petroleum liquids production, partner countries’ output fell by an estimated 5.9 million b/d in May, 7.9 million b/d in June and 7.1 million b/d in July before the pace started to moderate in August. Iran, Libya, and Venezuela were exempt from the agreement because of sanctions or domestic instability, EIA noted.
In the United States, meanwhile, total oil production rose to an estimated 11.2 million b/d in September from 10.8 million b/d in August, EIA said earlier this month in the latest Short-Term Energy Outlook.
In May, after oil prices collapsed into negative territory amid fallout from the pandemic, U.S. oil production reached a two-and-a-half-year low of 10.0 million b/d.
Despite the rebound following oil price recovery over the summer, EIA expects production to recede again in the coming months and average 11.0 million b/d in 2Q2021 “because new drilling activity will not generate enough production to offset declines from existing wells” as prices level off at around $40/bbl.
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