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OPEC's output fell by , barrels per day in March to just over 30 million as the producer group continues coordinated production cuts. Saudi Arabia takes another , bpd off the market, bringing output to just under 9. Venezuela's production plunges by , bpd to , bpd as its oil industry struggles in the country's economic crisis and U.
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The Truth And Repercussions Of The Saudi Drone Attack
The attack on Saudi oil facilities not only knocked out over half of the country's production, it also removed almost all the spare capacity available to compensate for any major disruption in oil supplies worldwide. The attack cut 5. But the attack also constrained Saudi Arabia's ability to use the more than 2 million bpd of spare oil production capacity it held for emergencies.
Most other countries cannot afford to drill expensive wells and install infrastructure, then maintain it idle. Before the attack, the OPEC global supply cushion was just over 3. That leaves around , bpd of spare capacity, mostly held by Kuwait and the United Arab Emirates. Iraq and Angola also have some spare capacity. They may now bring that production online to help plug some of the gap left by Saudi Arabia - but it won't be enough.
Yes, OPEC and its allies such as Russia have cut output to prevent prices from weakening because the market has been oversupplied. Those cuts aimed to reduce supply by 1. But much of that was from Saudi Arabia so it now cannot be reversed quickly. Non-OPEC members such as Russia are pumping near capacity, with perhaps only ,, bpd of available additional production.
Iran holds spare capacity but it cannot get the oil to market because of sanctions imposed by the government of U. President Donald Trump. Iran's exports have fallen over 2 million bpd since April. Washington has said Iran was behind Saturday's attack, so is unlikely to ease sanctions to allow Iran to plug a gap it believes was created by Tehran. Iran, for its part, said after the attack that it would pump at full volume if sanctions were eased. Representative Image. But Venezuelan output has been in freefall for years and state oil company PDVSA is unlikely to be able to boost production much even if sanctions were eased.
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The United States has become the world's top crude producer after years of rapid growth in supply from the shale sector, much of it pumped from fields in Texas. The U. Shale producers can move quickly to pump more when prices rise, and can bring production online in a matter of months. That is a much faster time line than most traditional oil production.
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If the Saudi outage looks like it will be prolonged and oil prices rally significantly, then shale producers will raise output. But even if shale producers pump more, there are constraints on how much the United States can export because oil ports are already near capacity. It all depends on how long the outage lasts.
Saudi Arabia, the United States and China all have hundreds of millions of barrels of oil in strategic storage. That is the storage that governments keep for exactly this scenario - to compensate for unexpected outages in supply. They can release oil from strategic storage to meet demand and temper the impact on prices. President Donald Trump said on Sunday he had authorised a release from the U. Strategic Petroleum Reserve.
The IEA, which coordinates energy policies of industrialised nations, advises all its members to keep the equivalent of 90 days of net oil imports in storage.
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