The oil supply outage in Nigeria is bringing some balance to the global oil market, erasing a sizable and persistent glut that has seen crude prices fall more than $80 per barrel over the past 23 months before rebounding back up near $50 per barrel in trading on Tuesday, May 17 The FT reports.
Supply disruptions around the world are likely to average more than three million barrels a day this month, with Nigerian output at its lowest level in decades.
Before these disruptions, the oil market was oversupplied by about 1.5 million barrels per day (mmbpd), so the goings on in Nigeria and the looming threat of a sharp drop in Venezuelan output as that country unravels are not only working to bring supply and demand back into balance, they could, as one Goldman Sachs analyst put it, push the market “into deficit in May”, Bloomberg reports.
A decline in production driven by unexpected supply disruptions, as well as sustained demand, have resulted in a “sudden halt” to the output surplus, Goldman analysts Damien Courvalin and Jeffrey Currie wrote in a report dated May 15. Other banks such as Morgan Stanley, Barclays Plc and Bank of America Corp. also noted that supply losses are leading markets to rebalance.
