There was a time when the term geopolitical risk conjured up unexpected events or military conflicts. The duration of these circumstances might be either brief or protracted, but the “risk” component in the term implied such incidents were not matters of deliberate policy. For oil markets, geopolitical risk often suggested a possible spike in prices as crude supplies tightened due to an unplanned outage.

Today, geopolitical risk can be viewed as having an added meaning. Far from encompassing just unexpected outages, the umbrella of geopolitical risk now includes actions taken in a deliberate, grueling policy of competition for market share aimed at squeezing out high-cost production and thwarting a long-standing rival Mideast producer. And, as we all know, oil prices haven’t been spiking.

Given the small cushion of spare capacity worldwide—Quantum Energy Partners CEO Wil VanLoh recently described it as “razor thin” at around 2%, or 1.8 million barrels per day (bbl/d)—an obvious risk exists if a series of unplanned oil supply disruptions happen concurrently. And that risk is exacerbated by today’s frayed balance sheets in a lower-for-longer price environment, which likely limits companies’ capacity to respond to unforeseen outages.

So what unforeseen events are happening around the world?

In Nigeria, a pipeline to Royal Dutch Shell’s Forcados export terminal remains off­line after an attack by unnamed assailants in February. Repairs to the pipeline, which typically carries up to 250,000 bbl/d, are expected to last until June. A similar attack by militants on a Chevron platform in the Niger Delta has occurred.

Production from fields in northern Iraq has suffered disruptions that are attributed to sabotage of pipelines and a dispute that ended in the central government in Baghdad suspending shipments of Kirkuk crude. Loading data show shipments of crude in the semi-autonomous Kurdistan region fell from about 600,000 bbl/d in January to 327,000 bbl/d in March.

On a larger scale—but much shorter duration—a rare show of unrest arose as oil workers in Kuwait went on strike, cutting production from 2.8 million barrels per day (MMbbl/d) to between 1.1 and 1.5 MMbbl/d over three days.

In Latin America, Colombia’s first-quarter oil production fell by almost 50,000 bbl/d from fourth-quarter levels. Although government data offered no details, industry observers noted that—in addition to field declines and lower investment—the 200,000 bbl/d Cano Limon pipeline had at times been forced offline due to sabotage.

In Canada, in what is more akin to an “act of God,” wildfires have been burning out of control for days in the oil-sands region of Fort McMurray. To protect pipelines, precautionary steps were taken resulting in an estimated 700,000 to 1 MMbbl/d of production being shut-in.

In what may also be viewed as an “act of God,” albeit compounded by years of government policy, Venezuela is facing power shortages as water levels at the Guri Dam—the hydroelectric facility that generates more than half the country’s power—have fallen to a record low. With risk of damage to some generators if water levels fall below minimum operating levels, progressively tougher measures are being taken to cope with the loss of power.

For the oil industry in Venezuela, electricity-powered upgraders are running below capacity or have been shut down. At ports, malfunctioning equipment has caused delays, hampering both exports and imports of lighter grades to blend with heavier Venezuelan crude. Financial issues abound, with Schlumberger and Halliburton having cut back or halted operations. First-quarter production was down 188,000 bbl/d from the same quarter a year ago, according to consultancy IPD Latin America.

Venezuela is one of five sovereign producers—the others being Iraq, Libya, Algeria and Nigeria—that “are on the precipice of a major crisis,” according to a note from RBC Capital Markets in late March. Of the “fragile five,” Nigeria and Iraq are viewed as being “at the greatest risk” of oil disruption.

Regarding re-balancing of the global supply-demand equation, RBC anticipated first draws on inventory would occur in the fourth quarter of 2016 in its base case, “but an outage of any length clearly accelerates the timeline of those draws, thus bringing price impacts forward.”

And without even touching on the desperate, dueling governments in Libya, expectations of one or more meaningful production outages seem a reasonable bet.

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