Citi: An Oil Supply Squeeze Is Inevitable
It’s somewhat tradition for oil analysts to produce a flurry of new forecasts after every sharp move in prices, and the latest rally in WTI and Brent is no exception.
In just the last couple of days we’ve seen one analyst predict prices of $80 per barrel, while a panel of several other analysts forecast a price drop if OPEC ends its production cut deal as planned in March 2018.
Now Citi has joined in with a warning: whatever OPEC does, supply will likely get tighter next year.
The members that Morse believes will lead the supply crunch are Iraq, Iran, Nigeria, Venezuela and Libya. All of these, bar Venezuela, have announced plans for a ramp-up of their oil output. All of these, at the same time, face problems in ramping up production, but these problems don’t all come down to insufficient investment, which Morse blames for the pumping-at-capacity scenario.
Venezuela is in disarray and in no condition to expand its oil production. Nigeria and Libya have suffered numerous militant attacks on oil infrastructure, and it’s expected to continue.
Despite these persistent and grave challenges, both Nigeria and Libya have plans to increase production. The Nigerian Petroleum Development Company, for example, recently said it plans to raise its production in the Niger Delta by 320,000 bpd by 2020. Nigeria’s total could grow to 4 million bpd by that year, according to plans announced by oil minister Emmanuel Ibe Kachikwu.
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