Possible squeeze on spare production capacity spooks oil analysts
Spare capacity is what oil producers can bring onstream and sustain at short notice, providing global markets with a cushion in the event of an unplanned supply outage
London — The oil industry will face the biggest squeeze on its spare production capacity in more than three decades if producer cartel Opec and its allies agree next week to hike crude oil output, leaving the world more at risk of a price spike from any supply disruption. Spare capacity is the extra production oil-producing states can bring onstream and sustain at short notice, providing global markets with a cushion in the event of natural disaster, conflict or any other cause of an unplanned supply outage. That buffer could shrink from more than 3% of global demand now to about 2%, its lowest since at least 1984, if Opec, Russia and other producers decide to increase output when they meet on June 22-23, US bank Jefferies said. "You would essentially be taking 3.2-million barrels per day of spare capacity down to approximately 2-million barrels per day," Jefferies analyst Jason Gammel said, adding global demand was 100-million barrels per day. Some analysts say spare capacity could...
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