Pipeline leaks and shipping disruptions are doing more to reduce the global oil glut than producers who can’t seem to agree on whether to cap output.
Outages from Iraq and Nigeria have disrupted more than 800,000 barrels a day of supply and tightened the Brent market, according to Citigroup Inc. That’s coincided with a 20 percent jump in Brent prices toward $40 a barrel since a proposed production cap from Saudi Arabia and Russia captivated the market and helped turn sentiment bullish. No deal has been struck and Iran has spurned the idea as it seeks to maximize output.
“Actual disruptions and cuts we’re seeing in the background are largely going unnoticed,” Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney, said by phone. “U.S. supply is declining and we’re seeing other little disruptions occur here and there. Those types of things are slowly chipping away at the surplus.”
Brent oil has gained about 40 percent since slumping to a 12-year low in January. The International Energy Agency predicts prices may have bottomed as shrinking supplies outside the Organization of Petroleum Exporting Countries and disruptions inside the group erode the global glut. JBC Energy Asia estimates the market, facing a surplus of about 2 million barrels a day in the first three months of the year, will start to rebalance during the third quarter. Read more