World oil supply up but spare capacity tight: EIA
Reuters, 26 June 2012
World oil inventories have risen over the past two months, aided by increased
output from Iraq and Libya, but spare production capacity remains tight, the
U.S. government said on Tuesday.
Global fuels output exceeded consumption by an average of 1 million barrels
per day in May and June, helping to push oil inventories higher and prices
lower, the Energy Information Administration said in a report, obtained by
Reuters ahead of its publication.
The EIA report is required every 60 days under the Iran sanctions law signed by
President Barack Obama late last year that called for restricting Iran's ability
to sell its crude oil on world markets.
The EIA estimated that world spare production capacity grew in the last two
months to 2.4 million bpd, up from 2.1 million bpd in the previous two
The EIA warned, however, that spare world oil capacity was less than 3
percent of total world consumption, making it a factor as U.S. imposes sanctions
and the European Union embargoes Iranian oil shipments from July 1.
"Spare capacity in May and June is still quite modest by historical
standards, especially when measured as a percentage of global oil production and
consumption," the EIA said.
With only a thin spare oil supply cushion, unforeseen oil production outages,
such as major damage to oil platforms from hurricanes in the Gulf of Mexico or
an upsurge of violence in producers such as Nigeria can quickly boost oil
Global liquid fuel output in May and June hit 88.9 million bpd, up about 2.9
million bpd from the same period last year, the EIA said. Most of the gain came
from increased output from Organization of the Petroleum Exporting Countries
members Iraq and Libya. Output has also grown from Saudi Arabia.
The figures showing better supplies and falling oil prices cheered supporters
of U.S. sanctions on Iranian oil transactions that get underway on June
"This is great news for sanctions supporters and very bad news for the
Iranian economy," said a Senate Republican aide.
"With oil prices down and markets getting looser, the President and Congress
have maximum flexibility to push the envelop with regard to economic sanctions.
It's only going to get worse for Tehran from here."
Output in Iraq hit 2.9 million bpd in May and June, the highest since 2000,
as new infrastructure helped increase exports from its southern fields. Libya's
production which had virtually ceased for much of last year, has been restored
to between 80 and 90 percent of the level it was before the civil war.
World fuel consumption averaged 87.9 million bpd over the last two months, up
600,000 bpd from the same period last year, the report said.