(EnergyAsia, May 28 2012, Monday) — The world’s Q1 spare oil production capacity, held mostly by OPEC members, has fallen to about 2.4 million b/d, the lowest level since 2008, said the US Energy Information Administration (EIA).
It has also fallen to less than 3% of total world crude oil consumption, the lowest proportion since the fourth quarter of 2008, which sets the stage for increased volatility or sharp price increases in the event of a severe disruption to global supplies.
Crude oil prices touched an all-time nominal high of more than US$147 a barrel in July 2008 partly in response to the world’s spare capacity falling below two million b/d and staying there for most of the year.
As OPEC members boosted production, spare capacity recovered to reach a seven-year high of 4.5 million b/d in late 2009, but it has resumed decline since.
The EIA said the Q1 global spare capacity is down about 1.3 million b/d from the same period in 2011.
Traders watch the spare capacity as it serves as a buffer against oil market disruptions, while giving OPEC leverage to influence prices as there is little or no spare capacity outside the cartel.
The EIA defines spare crude oil production capacity as potential oil production that could be brought online within 30 days and sustained for at least 90 days. This does not include oil production increases that could not be sustained without degrading the future production capacity of a field.