Brent crude hit a new two-week high at $112 a barrel as South Sudan’s troubles turned attention to Africa as an important pain point for the global oil trade. Output losses from South Sudan are still relatively small, but that could change in a hurry. The FT:
“The loss will depend on what happens this week on the ground,” said one executive. “If the fighting continues near the fields, we will see more wells shut down. If both sides guarantee some security, the production may continue.”
The South Sudan crisis comes as the oil market is already weathering the loss of about 350,000 b/d from Nigeria, due to sabotage and theft, and at least 1.1m b/d from Libya, due to fighting between Tripoli and local militias.
As the FT points out, the shortfall in African oil is exceeding whatever extra oil was coming to market due to the US shale boom.Three quick related points on this:1. The Libya intervention was a horrible disaster; if a Republican president had made this destructive blunder, the press would be hanging on every last luscious detail of fail. Since it was a liberal Democrats who unleashed horror and ruin on people all across Libya, who utterly failed to provide stability and order after the intervention destroyed all that Libya had of a state, and who continues to blunder around in the wreckage of the policy, the press is saying as little as possible about it. But note that simply in terms of lost oil production (and therefore lost wealth for the suffering people of Libya) the numbers are very high. Historians will not ignore this mess, and posterity will look harshly on those responsible.2. Saudi Arabia is more important than some people think. It remains the world’s great swing producer and like the Saudis or not, their views on key issues need to be taken into account.3. And even if the US shale gains are so quickly offset by African instability, shale is still a mighty blessing. Just think what would be happening to oil prices and the fragile global economic recovery if we didn’t have shale oil production to help offset losses elsewhere.