The oil industry will face the biggest squeeze on its spare production
capacity in more than three decades if OPEC and its allies agree next
week to hike crude output, leaving the world more at risk of a price
spike from any supply disruption.
Spare capacity is the extra production oil producing states 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.
That buffer could shrink from more than 3 percent of global demand now to about 2 percent, its lowest since at least 1984, if the Organization of the Petroleum Exporting Countries, Russia and other producers decide to increase output when they meet on June 22-23, U.S. bank Jefferies said.
Some analysts say spare capacity could even fall below 2 percent, after years of low oil prices drove down investment in new production across the industry.
Saudi Arabia, OPEC’s de facto leader which has indicated its support for hiking output at next week’s meeting in Vienna, has said it is alert to the potential squeeze on the market.
OPEC and its allies have been curbing supply since January 2017 to boost oil prices and cut bloated global inventories. The price of crude has since surged, climbing above $80 a barrel last month, while inventories have also fallen.
That buffer could shrink from more than 3 percent of global demand now to about 2 percent, its lowest since at least 1984, if the Organization of the Petroleum Exporting Countries, Russia and other producers decide to increase output when they meet on June 22-23, U.S. bank Jefferies said.
Some analysts say spare capacity could even fall below 2 percent, after years of low oil prices drove down investment in new production across the industry.
Saudi Arabia, OPEC’s de facto leader which has indicated its support for hiking output at next week’s meeting in Vienna, has said it is alert to the potential squeeze on the market.
OPEC and its allies have been curbing supply since January 2017 to boost oil prices and cut bloated global inventories. The price of crude has since surged, climbing above $80 a barrel last month, while inventories have also fallen.
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