21 Jan 2022 , 01:18 PM
The US Energy Information Administration or EIA has noted in a latest update that it estimates approximately 0.4 million barrels per day (b/d) of crude oil production went offline in Libya in late December. This outage contributed to the increase in the Brent spot price to $89 per barrel (b) as of January 18, 2022, from a December average of $74/b. In addition, protests in Kazakhstan have likely also put upward pressure on the Brent crude oil price as a result of the increased risk of outages in that country. We estimate that combined OPEC unplanned production outages increased in December and likely will increase in January as a result of the outages in Libya. Nonetheless, we forecast OPEC crude oil and total liquid fuels production will increase by 2.7 million b/d in 2022 to 34.3 million b/d and that OPEC will still hold more spare production capacity than historical averages.
Although crude oil production averaged nearly 1.2 million b/d in Libya during 2021, political disputes continue to create considerable uncertainty. In December 2021, production averaged less than 1.1 million b/d because armed militants shut in an estimated 370,000 b/d from the four key oil fields in the southwestern part of the country. Most of the shut-in production was from the Sharara field. EIA estimates that OPEC unplanned outages increased to 2.2 million b/d in December 2021 as a result of these outages. In addition, ongoing maintenance issues on the country’s aging infrastructure also continue to limit oil production in Libya, and political risk is heightened as a result of the indefinite delay in Libya’s presidential and parliamentary elections that were scheduled for December 24, 2021.
Despite the recent increase in unplanned outages, EIA estimates that OPEC members still hold higher-than-average spare production capacity. The extent to which OPEC member countries use their available production capacity is often an indicator of how tight global oil markets are.Even with increased OPEC crude oil production, remaining surplus production capacity likely will be more than sufficient to meet additional demand, say EIA. OPEC production will grow in 2022 despite recent unplanned oil production outages in Libya. More than 60% of crude oil production growth will come from Saudi Arabia, UAE, Kuwait, and Iraq, where the largest amount of surplus crude oil production capacity is available and can be used in response to the new production targets.
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