Oil Prices Remain Volatile As Spare Capacity Dries Up 08/06/22

Oil prices face big volatility as spare capacity dries up

After more than a year of pressure from the United States and other top oil consuming countries, OPEC+ finally agreed to accelerate oil supply increases last week to tame runaway fuel prices and slow inflation.

But that will leave producers with very little spare capacity, and almost no room to compensate for a major supply outage.

The most conservative estimates forecast OPEC’s spare capacity dropping to below 1 million barrels per day (bpd) later this year, representing about 1% of global demand and barely one twentieth of U.S. demand.

Only a handful of OPEC producers, namely Saudi Arabia and the United Arab Emirates, have any meaningful spare capacity.

Saudi Arabia says it can produce about 12 million bpd, but this level has never been tested. The kingdom has never previously pumped at the 11 million bpd mark for a sustained period.

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https://www.reuters.com/markets/commodities/oil-prices-face-big-volatility-spare-capacity-dries-up-2022-06-08/