US crude supply revised down due to structural damage

ICE Brent crude prices edged higher today, expanding by 1.2%, after a volatile downward move yesterday, likely due to the continued selling pressure in global equity markets due to the fallout of the Chinese promoter Evergrande and a rally of the dollar. Yet, with Shell’s announcement that one section of their platform in the Gulf of Mexico – which delivers crude from their Mars and Olympus platform – would not be operational until 2022 due to structural damages, the global oil complex lost about 0.25 mb/d of production for Q4 21, which amounts to 27 mb, which is the equivalent of the US output losses from Ida (currently at 28 mb). 

Floating storage across oil importers continued to drop last week, as reported by satellite measurements, highlighting the constructive balance for crude markets. Given the downward revision in US crude supply, sour crudes such as Urals and Middle-eastern OPEC barrels are likely to be supported in the short term, as Shell will be unable to deliver on their Q4 term agreements.