Crude oil supply woes: unrest in Kazakhstan, Libya and Nigeria cause major conerns

Kazakhstan unrest and oil supply - January 2022

As the US crude oil inventories have been falling consistently since November, new concerns have been growing in the same proportion about the scale of the challenges, when it comes to meeting the mounting demand.

The unrest in Kazakhstan, the former Soviet Republic in Central Asia, the worsening situation in the Libyan oil sector due to the influence of competing militia groups for dominance, Nigeria’s inability to sticking to its OPEC+ quota due to endemic problems at loading facilities have exacerbated the potential disruptions in the supply chain.

The failure of some members of the OPEC+ in contributing the quota agreed upon by the members surfaced in the recent monthly meeting of the block too; in short, although the members, in principle, agreed to increase the daily output by 400,000 barrels, in practice, it had not materialised in the past; nor will it work that way either in the near future, judging by the news that comes from the member nations.

Even Russia faced mounting challenges in boosting its production and making its share of quota available to the crude oil markets.

Some analysts believe that the challenges faced by the producers, to some extent, stem from the lack of investment in the sector by investors, who are worried about future prospects due to relentless march of the renewable sector.

In this context, oil traders have correctly gauged the mood of the crude oil markets, which resulted in a substantial increase in price.

When the crude oil markets were closed on Friday, WTI and Brent stood at $78.90 and $81.75  respectively.

Weekly oil price - January 2022

The talks on reviving the JCPOA, meanwhile, have already lost steam and continue at a lethargic pace, while signatories maintaining an understandable, diplomatic optimism.

With that, the potential contribution to the crude oil markets by Iran remains a distant reality.

That means the misplaced fear of crude oil markets being overwhelmed by the Iranian oil is slowly fading away as far as investors are concerned.

The rise in the price of natural gas, meanwhile, is adding an additional anxiety to the crude oil markets – at a different level. It is usually blamed on the plummeting temperature in the norther hemisphere, which used to enjoy unusually high temperatures, a few days ago.

If the price of crude oil continues to rise at this rate, yet another political intervention is unavoidable in terms of releasing SPRs, Strategic Petroleum Reserves, despite its failure to achieve the intended goal – or the glory. 

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