Oil Glut Will Worsen and Price Volatility Will Intensify Due to Liberian, Nigerian Activity: Analysts

by Ship & Bunker News Team
Thursday September 15, 2016

Following this week's bad news that the global oil glut will persist for longer than experts such as the International Energy Agency assumed comes word that Libya and Nigeria will soon add to the bursting-at-the-seams inventory.

Libya's state oil company lifted curbs on crude sales from the ports of Ras Lanuf, Es Sider, and Zueitina on Wednesday, which represents an extra 300,000 barrels per day (bpd) of extra product.

Mustafa Sanalla, chairman of the National Oil Corp., wrote in a statement that the shipments from the three ports will allow Libya to double crude output to 600,000 bpd within four weeks.

In Nigeria, Exxon Mobil Corp. is reportedly about to resume shipments of Qua Iboe crude, which averaged about 340,000 bpd in shipments last year; additionally, a second Nigerian grade operated by Royal Dutch Shell Plc will reportedly produce about 200,000 bpd within a few days.

Bloomberg notes that if these resumptions go as planned, they will more than triple the global surplus.

Olivier Jakob, managing director at Petromatrix GmbH, remakred, "If you have some restart of Nigeria and some restart of Libya, then the rebalancing gets pushed even further out."

Thomas Pugh, commodities economist at Capital Economics, agrees, and points out, "it's another downward pressure for the markets because that would be a large amount to return to the market"; however, he doubts the resumptions will happen due to the strife and warfare that have plagued both countries.

Meanwhile, Canada's oil reserves have been cited as another source that might potentially contribute to global inventories: Steve Williams, CEO of Suncor Energy Inc., told the Toronto Global Forum that the country is close to getting an oil pipeline built, most likely Kinder Morgan Energy Partners LP's Trans Mountain or TransCanada Corp.'s Energy East – and that this will reverse Canada's reputation of not being able to get things done.

Williams also planted himself firmly in this week's majority analytical camp by stating that oil prices will become more volatile after next year, due to under investment in production and uncertain demand growth.

Robert Rapier, a chemical engineer and author, is proving to be this week's only optimistic voice: writing in Forbes, he points out that the IEA's figures about global demand for oil slowing are being misinterpreted, and that demand this year "is expected to be 1.3 million bpd higher than it was a year ago; next year it is still expected to be 1.2 million bpd higher than it is this year.

“So demand isn't weakening, it's growing."