Quote of the Day
Now, we have inscribed a new memory alongside those others. It’s a memory of tragedy and shock, of loss and mourning. But not only of loss and mourning. It’s also a memory of bravery and self-sacrifice, and the love that lays down its life for a friend – even a friend whose name it never knew.
George W. Bush
With Obama backing down and opting for a test of the diplomatic solution that emerged yesterday, Syria is starting to move into the background as a short term price driver for the oil complex. Obama asked the U.S. Congress to postpone its vote and allow time for diplomacy to work. For now President Obama dodged a bullet in not having to get involved militarily in Syria… a very unpopular course of action among the American public as well as the international community.
Oil prices (NYMEX:CLV13) have shed a major portion of the Syrian risk premium with the spot Brent contract declining over $6/bbl since peaking in late August. The spot WTI contract shed about $5/bbl over the same timeframe. The oil complex is now back to focusing on the main underlying support for current prices — the plethora of supply disruptions that have been plaguing the complex for the last several months. Below is a good summarization and several charts that the EIA has issued that puts the supply problems in focus. With Syria out of the news cycle for the moment oil prices are likely to stabilize and not enter into a major decline in the short term.
Yesterday the EIA released it latest Short Term Energy Outlook Report (STEO). Following are the main oil highlights.
- An increase in unplanned liquid fuels production disruptions in August combined with peak summer demand and exacerbated by rising concerns over the conflict in Syria and its regional implications, contributed to a tighter world oil market during the month. The total volume of world production that is offline because of unplanned outages among OPEC and non-OPEC producers in August was the highest since at least January 2011 (see STEO Supplements EIA Estimates of Crude Oil and Liquid Fuels Supply Disruptions and Status of Libyan Loading Ports and Oil and Natural Gas Fields). Liquid fuels production disruptions in August reached 2.7 million bbl/d, with 2.1 million bbl/d of crude oil production outages from OPEC producers. This level of crude oil production outages among OPEC producers is the highest since at least January 2009, when EIA began tracking OPEC outages.