New major oil outage would strain supply

July 2, 2014

The world’s unused spare oil production capacity would struggle to cover another big outage, industry officials and analysts say, increasing the chance governments may tap strategic reserves should Iraq’s southern exports be disrupted.

Unrest in Iraq comes as the almost total loss of Libyan supply, Western sanctions on Iran as well as conflict in Syria and northern Iraq are keeping almost 3 million barrels per day – more than 3 percent of world demand – off the market.

More Saudi Arabian supply, and the U.S. shale oil boom, have helped to plug gaps, but another crisis would deepen dependence on Saudi Arabia, who are alone in holding significant amounts of unused production capacity.

Militants from the Islamic State in Iraq and Greater Syria (ISIS) overran the northern Iraqi city of Mosul in June, increasing concern of a disruption to exports from the second-largest OPEC producer. So far, Iraq’s southern shipments are unaffected.

Copyright, The Daily Star, 2014.