United States oil expected to meet most of world's growth in demand

Pic Reuters

Pic Reuters

The world's largest oil producers appealed to USA shale producers to join their efforts to hold global prices at their current level at a major energy conference Monday, as the boom in shale is continuing to undermine OPEC's production curbs.

Production of shale oil is expected to represent more than half of the output growth for the world of 6.3 million bpd, said the IEA in its outlook report of five years.

OPEC, the Organization of the Petroleum Exporting Countries, will increase capacity only modestly through 2023 largely because of sharply falling production in Venezuela, according to the energy agency forecast.

Iran's heavy crude oil average price also experienced a $1.64 growth in February reaching $61.73 per barrel.

According to the International Energy Agency, US shale oil output is expected to rise over the next five years.

All that US production should keep prices at the pump from rising. USA crude production is projected to hit a record of 12.1 million barrels a day in 2023, which would reflect an increase of roughly 2 million barrels compared with this year. That was the year before the price for oil in the US surged close to $150.

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The cut back by OPEC and other non-OPEC oil producing nations has helped to push the current per barrel price of crude to over $60.

"The current production outages merely hide the fact that the oil market is amply supplied thanks to the sharply rising USA oil production", Commerzbank said in a daily note.

"With limited additional demand for these volumes in the domestic refining system, future US production will need to clear into export markets", Wood Mackenzie's chief economist Ed Rawle said in a release Monday. "Without large-scale capital investment, the US domestic market can only absorb about a quarter of the additional four million b/d of USA crude expected to enter markets [by] 2023, leaving the rest for exports", Wood Mackenzie said.

The IEA says rail shipments are expected to return to around the 170,000-barrel-a-day level in 2020 assuming Enbridge Inc. replaces its Line 3 pipeline and adds capacity elsewhere on its Mainline pipeline system.

Meanwhile, non-OPEC production is set to increase as much as 5.2 million barrels per day by 2023 to 63.3 million barrels per day, with the United States alone accounting for more than half of global supply growth. This is around 2 million barrels a day higher than 2018 production.

"Despite talk of capital discipline and increased focus on returns rather than growth, United States producers regrouped quickly when oil prices stabilized and began to rise", said the IEA.

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