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Saturday , March 28 2020

Resuming oil production in divided zone to give strong boost for OPEC

‘Surplus production capacity still limited’

KUWAIT CITY, Feb 18: Resuming oil production in the divided zone (neutral zone) will provide additional oil capacity of 500,000 barrels per day in the markets.

This will constitute a strong boost for OPEC in the event that the oil supply is exposed to any possible shortages in the coming period, reports Al-Qabas daily quoting a report on the National website.

The report indicated that surplus production capacity is still limited, as it was estimated at 3.2 million barrels per day in 2019, according to the International Energy Agency, with 2.27 million barrels from Saudi Arabia alone.

Meanwhile, attacks on ARAMCO facilities in September last year halted production of 5 percent of global oil supplies, and left the world without any spare production capacity.

However, plans to revive production at the divided zone gained momentum because of Saudi Arabia’s sense of the need for oil reserves in the event of any possible disruption in part of its supplies in the future.

The addition of more oil supplies at present may cause a problem in the crude markets, which are already fl ooded with large quantities of shale oil and supplies from outside OPEC, especially from Norway and Brazil.

The spread of the coronavirus also weakens the growth of oil demand. The report stressed that production in the divided zone may be quite welcome in the markets, given that it may constitute an alternative to Iranian and Venezuelan oils, which suffer from shortage of production due to American sanctions.

It pointed out that refineries will also welcome the production in the divided zone, especially those on the US Gulf Coast where refining margins have been shrinking due to the recent lack of Venezuelan oil.

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