If crude oil output is lower than currently expected, oil prices could move higher than expected. This is good news for Canada (Canadian oil producers)
As crews struggle to contain the crude oil
and natural gas billowing from BP’s ruined Deepwater Horizon drilling
rig in the Gulf of Mexico (GOM), concerns
are starting to mount about the effect the
U.S. government’s response will have on
future crude oil supplies.
On May 27, U.S. Interior Secretary Ken Salazar extended the
GOM moratorium on deepwater drilling to
six months. Although a Louisiana federal
district court judge overturned the six
month deepwater drilling moratorium on
June 22, the federal government is expected
to appeal the ruling and request a stay on
the injunction. On June 23, Salazar told a
Senate Appropriations subcommittee that
he would be issuing a new deepwater
drilling moratorium, but did not say when
it would be issued.
S&P Equity Research expects a moratorium to have an enormous
impact on short-term drilling activity in the
GOM, but a delayed negative impact on oil
and gas production levels — which could
force prices higher.
OPEC member nations currently
have a fairly large amount of spare
capacity, about 6 million b/d, according
to IEA estimates. While that likely
would be enough to make up for lost
production even under a worst-case
scenario, the impact of a potential loss
of as much as 1 million b/d “can’t be
ignored,” Tanaka said. The IEA latest
midterm estimate puts OPEC spare
crude capacity at 3.5 million b/d by
2015, making oil prices vulnerable to
potential delays.
Saverio Manzo
www.saveriomanzo.com
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