EIA predicts OPEC spare capacity to fall below 2mb/d by 2020

*OPEC flag.

OpeOluwani Akintayo

Lagos — The United States based International Energy Agency, IEA, has said OPEC crude oil spare capacity will fall below 2million barrels per day by 2020.

Spare capacity is the extra oil a producing country can bring onstream and 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.

In a graphical representation, the Agency showed a sloppy movement of the Organization for the Petroleum Exporting Countries, OPEC spare capacity going from over 6mbd in the 2000s.

The biggest crash occurred from 2000-2005 where the Organization’s capacity crashed to around 2mb/d.

It rose to around 4mb/d from 2010-2015, dropping again to 2mb/d from 2015-2019.

Now, the Agency sees it skidding further to around 1.9mb/d by 2020.

Saudi Arabia has long been seen as owing the world’s spare capacity.

Iran and Venezuela also rank high as countries with large spare capacity.

While Iran and Venezuela are currently facing sanctions by the U.S, an attack on Saudi oil facilities on Saturday is believed to have disrupted half the country’s production capacity, making the United States the only real holder of the global supply cushion via its ability to raise own output or to soften sanctions against other major oil producers, a report by Reuters had said.

Although Saudi Arabia is yet to comment on the extent of damage on its oil production however, Reuters, quoting industry sources said some 5-6 million barrels per day (bpd) or 5-6% of global supply have been affected.

The United States briefly overtook Saudi Arabia as the world largest crude exporter this year as it currently produces around 15% of global supply. The country also has a significant spare capacity.

Iran’s exports has fallen by over 2 million bpd since the sanctions, predicted to fall further, while analysts expect Venezuelan production to more or less stabilize at its current output of around 700,000-800,000 bpd for the rest of the year.

Energy Aspects said it expects OPEC spare capacity to fall to below 1 million bpd in the fourth quarter from two million bpd in the second quarter of 2019.

The ongoing civil in Libya and low production from Nigeria are other factors that could worsen OPEC spare capacity.