Outages in Latin America to help relieve global oil supply glut

Fri Apr 1, 2016 6:00am EDT
 
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By Marianna Parraga

HOUSTON, April 1 (Reuters) - From Peru to Brazil, a rash of unplanned outages at ports and pipelines and necessary maintenance work at oilfields is taking a bite out of global production, unexpectedly curbing a historic supply glut.

Even though the disruptions are individually small, taken collectively they are helping slow an unprecedented global build-up of surplus crude stockpiles estimated at 1.5 million barrels per day (bpd) for the first half of 2016.

While likely short-lived, they could foreshadow a larger and longer-lasting output decline from a region that, because of its dependence on oil exports, is particularly vulnerable to the damaging effects of prices under $40 a barrel.

"Latin America is among the world's most vulnerable oil regions right now," said Robert Campbell from Energy Aspects. "We are expecting an exports decline of at least 100,000 barrels per day in the second quarter and possibly as much as 200,000 bpd compared with the same period of 2015."

Venezuela, the largest exporter in a region that pumps about a tenth of the world's oil, is suffering from selling its barrels at near break-even prices, even as equipment failures have hurt its crude upgrading and delayed loading and discharge at its main oil port.

In March, state-run PDVSA's crude exports from Venezuela and Curacao including oil and diluents re-exported as blends declined almost 300,000 bpd from a year earlier to 1.64 million bpd, according to preliminary data from Thomson Reuters Trade Flows.

"The situation at Jose port is starting to affect crude flows as some companies are not willing to bear demurrage costs. A largest effect of this delay could be seen in April," said a trader from a firm producing crude at Venezuela's Orinoco belt.

PDVSA, which has said its exports are at normal levels, did not respond to requests for comment.   Continued...