Last weekend, many soccer fans in the United Kingdom and elsewhere focused their attention on the start of the new season of the Barclays Premier League (BPL), one of the top leagues in the world. But the BPL opening day was not the only item of global interest in the United Kingdom. Petroleum analysts throughout the world also noticed recent increases in the price of Brent crude oil.
Disruptions to global crude oil and liquid fuels production reached nearly 2.7 million barrels per day (bbl/d) in July 2013 (Figure 1), the highest level since at least January 2009. During this same period, global refinery crude oil runs reached their expected 2013 peak. Combined, these developments helped push Brent spot prices to an average of $108 per barrel in July, above the $102-$103-per-barrel average from April through June.
However, this upward price movement was likely muted in part by growing non-OPEC supply in other regions, including growing U.S. production that has reduced U.S. imports of crude oil and in so doing released more barrels from global suppliers to other markets. Through the end of the third quarter and into the fourth quarter, EIA expects that continued rising non-OPEC production combined with seasonally decreasing demand from refiners will put downward pressure on Brent prices. In the August Short-Term Energy Outlook (STEO), EIA projects the Brent spot price will average $104 per barrel in September, and $102 per barrel in the fourth quarter.
Disruptions to production in Iraq and Libya have had a significant effect over the summer, reducing crude supplies, particularly into the Mediterranean market, an important market for Brent-priced crude oils. In Iraq, persistent attacks on the pipeline from Kirkuk to Ceyhan in Turkey helped push total Iraqi production disruptions to about 290,000 bbl/d in July, up 60,000 bbl/d from June. In Libya, ongoing labor-related protests at several oil production facilities boosted outages, thereby reducing production to 1.0 million bbl/d in July, down from 1.5 million bbl/d in April. Additional deterioration in the security environment in Iraq or Libya could further reduce OPEC production in the short term. In Nigeria, crude exports were reduced during July and August as deliveries of the country's Bonny Light grade were disrupted by work on key pipelines.
Outages in non-OPEC member countries as well as record-high global refinery runs also tightened crude supplies and contributed to higher crude oil prices. The International Energy Agency (IEA) reported that global refinery runs were 78.3 million bbl/d in July, up from an average of 74.8 million bbl/d in the second quarter. The IEA expects global runs to remain at a fairly hefty 77.4 million bbl/d in August. From a supply standpoint, disruptions to non-OPEC production averaged about 800,000 bbl/d, most of which occurred in Sudan and South Sudan, Yemen, and Syria, and which were largely already priced into market expectations. However, unanticipated flood-related disruptions in Canada, mostly affecting North American inland markets, contributed almost a quarter of the total non-OPEC outages.