Photographer: WPA Pool

Surging Atlantic Crude Adds to Seasonal Pressure on Prices

  • North Sea shipments set to reach highest level since 2012
  • Abundant supply comes as refiners poised to start maintenance

The North Sea and Nigeria will ship the most crude in more than three years in October, adding to downward pressure on oil prices just as demand wanes from refiners shutting down for seasonal maintenance.

Output of North Sea grades will reach the highest since May 2012 next month, according to loading programs compiled by Bloomberg. Supplies from Nigeria, the biggest oil producer in Africa, are set to reach a level not seen since August of that year.

“It’s directionally bearish for crude,” Vikas Dwivedi, an analyst at Macquarie Capital Inc. said by e-mail. “The large loading programs will need buyers.”

Production in the North Sea is rising as projects come online that were sanctioned with oil prices above $100 a barrel, according to the International Energy Agency. This coincides with the end of a shutdown in Nigeria caused by a pipeline leak, allowing supplies to flow back to the market, Dwivedi said. Demand for crude will weaken as refiners shut down for seasonal maintenance, although this year’s schedule will be lighter than usual as companies take advantage of high profit margins.

Shipments of Brent, Forties, Oseberg and Ekofisk and other North Sea grades, will average 2.1 million barrels a day in October, according to data compiled by Bloomberg. Nigerian supplies will total 2.2 million and Angola will ship 1.77 million, the data show.

There is an “existing overhang of crude in the northwest of Europe, as well as in West Africa,” Abhishek Deshpande, an analyst at Natixis SA said by phone. Together with refiners going offline for seasonal maintenance, that “only tells you one story -- pressure on Brent and West African prices.”

Persistent Surplus

Brent crude fell $1.46 to $48.15 a barrel at 4:13 p.m. on the London-based ICE Futures Europe Exchange. The North Sea benchmark has fallen more than 50 percent in the past year amid a persistent global production surplus.

Refineries in Europe are expected to halt an average of 162,000 barrels a day of processing capacity from this month through to the end of the year compared with 768,000 a day in the same period of 2014, energy consultancy Wood Mackenzie said on Aug. 25. Maintenance, which usually starts in the third week of September or first week of October, may also be pushed back, Deshpande said.

The current increase in North Sea production is temporary relief for an industry facing long-term decline in output from aging fields and high production costs.

The collapse in oil prices has forced companies in the region to cut costs costs, resulting in the loss of about 5,500 jobs since late 2014, the U.K. Oil & Gas Authority, the industry regulator, said in a report Monday. The organization was set up to lay out a plan for improving the competitiveness of the North Sea.

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