Raymond James Energy Stat of the Week
by J. Marshall Adkins

Energy Stat: As Libya's Factions Fight It Out, This Is Yet Another Oil Supply Outage to Keep Us Busy
July 16, 2018

With OPEC and global excess oil productive capacity poised to fall to near zero over the next six months, the risk of any global oil supply disruption becomes a BIG, BIG DEAL going forward. Even within OPEC, there are many uncertainties when it comes to sustainable production including: 1) How much spare capacity does Saudi Arabia have?; 2) How will the return of U.S. sanctions impact Iranian exports?; 3) What happens to other OPEC countries whose production has been steadily declining for years (including Algeria, Angola, Equatorial Guinea, Gabon, Qatar, and Venezuela)?; 4) Speaking of Venezuela, how long before PdVSA begins to barter crude for emergency supplies of toilet paper?; and 5) What will happen to what is (arguably) the most unpredictable OPEC producer - Libya?

In this week's ''Stat'', we will discuss Libya's recent oil supply disruptions and offer our take on its future production outlook. As recently as May, all seemed well since Libya had been consistently producing around 1.0 million bpd for the past year. Over the past month, however, Libyan production has fallen sharply (even more sharply than Venezuela) as escalation of political strife has now added to the global oil market's current spate of supply disruptions. As shown below (and in contrast to our expectations for Venezuela), we are modeling a recovery in Libyan output to the approximate 1 million bpd levels seen before the latest disruption. That said, this assumed recovery is by no means set in stone, and our bias is likely to the downside: thus, bullish for oil prices.

This is a summary of a much more detailed commentary. Please contact your financial advisor for the full report.

There is no assurance any of the trends mentioned will continue in the future. Past performance is not indicative of future results. Investing involves risk and investors may incur a profit or a loss. Specific sector investing can be subject to different and greater risks than more diversified investments. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only form a small part of a diversified portfolio. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.

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