The March crude contract is going out like a February lion poking above $80 a barrel on a slew of supply related issues that have crept up, raising worries that the combination of these things may cut into the global oil supply glut. Whether its strikes in Europe or supply issues in the North Sea, it is making expiration a bit more dicey and is making buyers of product a bit less complacent about their purchases.
There are so many problems it is hard to know where to start. The Wall Street Journal reports that Canada-based energy company Nexen Inc. said on Thursday that production at its Buzzard oil field in the U.K. North Sea was lowered to between 30,000 and 50,000 barrels of oil equivalent, a day after it discovered an item on the platform needing repair. Output is expected to remain at reduced rates "for the next several weeks", the company said in its fourth-quarter earnings press release. "On Feb. 16, we identified an item requiring repair to the separator unit on the Buzzard platform, we are currently investigating the cause," Nexen said. Buzzard crude makes up the largest component of the key Forties crude-oil blend produced in the North Sea. Buzzard gross production in the fourth quarter stood at around 200,000 barrels of oil equivalent a day, Nexen said in the press release. Market Watch News says that the oil market is eying reduced output at the Buzzard oil field in the UK North Sea, which will strengthen price support around $70 a barrel. Buzzard is a key component of the Forties crude blend, which is used in pricing around 60% of the world's oil.
The worry about supply is even impacting products as the closure of the Total Refinery is causing unions to strike. Reuter’s news reports the French government pledged to prevent any fuel supply problems in the country as workers at Total's French refineries sought to extend a six-day strike to other groups operating refineries in France. Total said around 100 petrol stations were already encountering partial shortages, notably near Toulouse in southwestern France, but the group downplayed the impact. “This is a drop in the ocean as Total owns some 4,600 petrol stations,” a Total spokesman said. France has over 12,500 petrol stations and Total supplies half of the country with petrol. Talks broke down on Sunday between Total and workers protesting against the possible closure of the company's Dunkirk refinery in northern France. But the Total spokesman said talks were still ongoing with unions, "at all levels of the company".
Then of course you have the issue of dollar weakness as the euro is gaining ground on talk of Greece getting through the next few months without borrowing. The Wall Street Journal reports that, “Greece borrowing needs are covered until mid-March", Greek Prime Minister George Papandreou said in an interview broadcast Sunday. “As I know, we don’t have at this point a need for borrowing: our borrowing needs are covered until mid-March,” he said in an interview with the British Broadcasting Corp. "What we are saying simply is we need the help so that we can borrow at the same rate as other countries, not at high rates which in fact undermine our possibility for making the changes and cutting down our deficit.”
Papandreou said his government has broad support in Greece for its austerity plans and that he would order further debt-cutting measures for this year if that proved necessary. “If we do need extra measures, we will take extra measures,” he said. He also said he is confident there is the "political will" within the European Union to offer support for Greece. And he said that there is no possibility that Greece will be suspended from euro membership.
And did we mention Iran yet? The bulls are getting everything that they want but still the reaction in oil is unimpressive considering all of the news. We feel that if any of these issues get resolved we could see a major reversal. We are going into the weakest demand period of the year and despite wintry weather, spring is just around the corner!
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at email@example.com.