The first quarter of 2012 saw a significant rise in global crude oil prices. After closing 2011 at $108 per barrel, Brent spot prices exceeded $125 per barrel by early March, before trading in a relatively narrow range for the remainder of that month. This price increase reflected changes in global oil supplies, as significant unplanned disruptions in production from countries that are not members of the Organization of the Petroleum Exporting Countries (OPEC) countered the recovery in Libyan production. Today's discussion explores these recent developments.
The Libyan disruption in 2011, which halted almost all of that country's 1.65 million barrels per day (bbl/d) of crude oil production, garnered the world's attention and helped to drive crude oil prices higher. As of the beginning of the fourth quarter of 2011, there was still an estimated 1.35 million bbl/d of Libyan production offline, but the situation has improved rapidly since that time. By April 2012, offline production was down to 350,000 bbl/d.
Figure 1 shows that total global unplanned production disruptions declined from October 2011 through January 2012 as Libyan production rose. However, during the first quarter of 2012, additional disruptions to production commenced or intensified. As shown in the figure, these disruptions were heaviest among non-OPEC producers, with total unplanned disruptions reaching an estimated 1.6 million bbl/d in February and March. Disruptions are expected to decline in April, but to remain above their January 2012 level.
Three countries accounted for most of the incipient losses in production from January through March: Canada, Sudan, and South Sudan, with the largest of these disruptions occurring in Sudan and South Sudan (Figure 1). The two countries have a combined baseline crude oil and liquids production of about 460,000 bbl/d, most of which is in South Sudan. For most of the fourth quarter, production was only slightly lower than this level. However, in late January, land-locked South Sudan shut in all of its crude oil and liquids production as a result of an unsettled dispute over pipeline transit fees and other issues that were not resolved prior to its independence from Sudan in July 2011. Negotiations between Sudan and South Sudan related to these issues have been set back by recent military clashes, including around oil installations, in the poorly defined border area.
There are also significant ongoing disruptions in non-OPEC producers Syria and Yemen. While the size of the outages from these producers fluctuates somewhat month to month, as of March, estimated disrupted volumes from those countries totaled 300,000 bbl/d, almost half of the two countries' combined baseline crude oil and liquids production capacity of 650,000 bbl/d. Disrupted volumes in those countries are expected to decrease to about 250,000 bbl/d in April.