The latest Oil Market Report (OMR) notes June/July price volatility, based on supply-side concerns affecting Iran and Norway, but also ongoing worries over sovereign debt issues in the eurozone. The latest Oil Market Report (OMR) notes June/July price volatility, based on supply-side concerns affecting Iran and Norway, but also ongoing worries over sovereign debt issues in the eurozone. Prices remain high, although supply ran well ahead of demand  during the second quarter of 2012. Stock builds in the OECD have remained muted, suggesting that substantial volumes may have moved into floating storage and/or non-OECD inventory.
Projections for 2013 are presented for the first time, showing modest economic recovery next year could generate demand growth of 1.0 million barrels per day (mb/d), compared to 0.8 mb/d in 2012. Growth in non-OPEC supply (+0.7 mb/d in 2013) plus 0.3 mb/d of incremental OPEC natural gas liquids, should match demand growth, leaving an underlying ‘call on OPEC crude and stock change’ for 2013 that is identical to 2012’s level of 30.5 mb/d.
Distillation capacity additions of a combined 2.3 mb/d in 2012 and 2013 outweigh likely demand growth, implying OECD refining profitability will remain under pressure. OPEC crude capacity increases by only 0.25 mb/d in 2013, as sharp decline from sanction-hit Iran counteracts increases in Iraq, UAE and Angola.
Norway’s oil production in July seen at lowest level in over 20 years
The International Energy Agency’s July Oil Market Report (OMR) estimates that the recent strike in Norway between oil and gas industry union workers and employees is likely to curb the country’s oil production by almost 150 thousand barrels per day (kb/d) in June and by 180 kb/d in July.
Compared with May, and taking into account other seasonal maintenance, Norway’s oil production in July is expected to fall by 0.4 million barrels per day (mb/d) to around 1.6 mb/d, according to the OMR. That is the lowest level from Norway’s Continental Shelf (NCS) since August 1991, when the Sleipner oil and gas platform in the North Sea sank, causing a seismic event that registered 3.0 on the Richter scale.
Norway is the world’s seventh largest oil exporter, producing around 2.0 mb/d in 2011 – roughly equal to the amount consumed in France every day.
Workers went on strike in mid-June over demands from trade unions for an early retirement scheme from the age of 62. In addition, the Norwegian Oil Industry Association then announced a lockout of all 6,515 workers to take effect from midnight on 9 July that would have halted all offshore oil and gas production in the NCS for the first time in 26 years.
Norway’s Labour Ministry, however, intervened at the last minute, stressing that such an outage would have threatened Norway’s reputation as a reliable supplier of gas to Europe and oil to world markets.
“The Labour ministry also cited the economic consequences of a shutdown on Norway’s economy, with the offshore oil and gas industry accounting for 21% of GDP and almost half of Norway’s exports,” stated the OMR.
In addition to the strike, unplanned outages at Norway’s Gullfaks, Snorre and Ormen Lange oil fields are also reducing output. However, Norway’s Skarv field, new drilling at Ekofisk and Eldfisk, as well as Valhall and Norne should sustain Norway’s oil production at 1.8 mb/d in 2013. This is around 3% – or 60 kb/d – lower than production in 2012.
Source: IEA