After a period of remarkable stability from October 2009 to September 2010, the oil price has soared primarily because of a significant increase of demand in the fourth quarter of 2010 and at the beginning of 2011, based on regional geopolitical risks in Northern Africa and Middle East.
The events in Libya have resulted in the shut-down of the country’s oil production with devastating consequences for specialized companies, who have started abandoning their operations in Libya, and for ports, which have stopped shipping oil. According to the International Energy Agency (IEA), oil production in the Organization of the Petroleum Exporting Countries (OPEC) reduced by 100,000 barrels/day in February, given the fact that some countries produced higher volumes, thus compensating for the decline in Libya. But it’s not only the events in Libya that influence the world oil market.The situation in Bahrain is also extremely worrying for businessmen, as the events might expand to Saudi Arabia, the largest oil supplier in the world. “The protests in Libya have a major impact on the oil market, but those in Bahrain are vital to the strategic balance in Middle East and to the global oil market”, declared Helima Croft, analysts at Barclays Capital. As a result, all these events have been the cause of an average increase in the oil price by 3 dollars/barrel/day. By mid-March, gross products have been traded by 10-15 dollars/barrel/day more than in February (USD 114/barrel/day). Globally, the oil demand remains mostly unchanged at a level of 2.9 million barrels/day (2010) and 1.4 million barrels/day (2011), “but higher prices imply significant risks of deceleration from this year’s estimates. The fundamental changes that occurred in the non-OECD countries from Asia and Middle East slightly raise the level of demand at 87.9 million barrels/day and 89.4 million barrels/day in 2010 and 2011 respectively”, shows the report of IEA for the first part of 2011.The devastating earthquake and tsunami that hit Japan on March 11 will have a profound impact on thecountry’s power generation sector. Damage to the nuclear industry forced the shut-down of 11 reactors representing 9.7 GW of capacity. An additional 8.5 GW of oil, gas and coal capacity was also shut-in, prompting the country’s largest utility, TEPCO (Tokyo Electric Power Company) to consider rolling blackouts. Consequently, the oil sector is changing rapidly and any estimate upon the impact on demand is premature. Nonetheless, short-time fuel switching within the power sector is likely to be significant, with oil, gas an coal being used to make up for the loss in the nuclear output. “The oil price is pushed in two directions. Japan’s disasters push the price towards a short-term drop and change the demand level as refineries have been seriously damaged. On the other hand, the problems in Bahrain and the other countries of the region continue to encourage the oil price increase”, said Bernard Baumohl, Chief global economist at the Economic Outlook Group. As for the situation in Europe, preliminary data show a 1.2% year on year increase in demand of oil products in January. In the OECD-Europe area, the demand increased at an average of 14.4 million barrels/day in 2010 (-0.3% compared to 2009). In 2011, the situation will mostly remain unchanged: the demand will continue to drop by 0.5% or -70 thousand barrels/day.
by Pamela Luică
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