The
U.S. will dominate global oil markets for years to come, satisfying 80 percent
of global demand growth to 2020 as the shale boom keeps OPEC under pressure,
the International Energy Agency said.
“The
U.S. is set to put its stamp on global oil markets for the next five years,”
IEA Executive Director Fatih Birol said in a report published Monday. OPEC’s
surging rivals, which include Brazil and Canada, will leave little space for
the cartel to expand even after its production curbs expire this year.
Energy
Dominance
New U.S.
output will cover 80% of global oil demand growth over the next three years
Source:
International Energy Agency
The
Organization of Petroleum Exporting Countries is riding high right now, defying
the skeptics by going deeper than their pledged cuts and maintaining them
for long enough to deplete bloated oil inventories. However, the ensuing price
recovery has “unleashed a new wave of growth from the U.S.,” said the
Paris-based IEA, which advises most of the world’s major economies.
Thanks
to the shale boom, new U.S. supply will cover more than half the world’s oil
demand growth to 2023, the agency said. Production from the prolific Permian
Basin will double over the period and the country’s total liquid hydrocarbon
output will rise to 17 million barrels a day from 13.2 million last year.
The
bullish forecast kick-starts the annual CERAWeek conference, a gathering of
thousands of oil executives, traders, bankers and investors in Houston.
The
American surge and a slightly weaker outlook for global demand growth make
uncomfortable reading for OPEC. The IEA slashed projections for the amount of
crude needed from the cartel, indicating its supply cuts would need to stay in
place until 2021 to avoid creating another prolonged surplus.
Under
Pressure
Demand
for OPEC's crude won't significantly rise above current output until 2021
Source:
International Energy Agency
Closer
to 2023, global markets will start to tighten and the IEA warned that more
investment is needed to meet growth in consumption and to make up for
production lost to natural declines.
OPEC will
struggle to start new production of its own. The IEA’s five-year outlook for
new output capacity from the group was reduced by about 62 percent from the
previous report. The group will add 750,000 barrels a day by 2023 -- just 2.1
percent -- as gains in Iran and Iraq are offset by economically troubled
Venezuela, where capacity will slump to the lowest since the 1940s.
There’s
a risk the wider industry may also fall short after an unprecedented drop in
spending from 2015 to 2016, and little sign of a rebound in the subsequent two
years, the IEA said. Constant investment is essential because the world loses
about 3 million barrels of output each year -- equivalent to the production of
the North Sea -- as oilfields age and their reservoir pressure drops.
As a
result, by 2023 the level of spare production capacity that could be used in
the event of a disruption will be the lowest since 2007. That increases the
risk that prices will become more volatile, the agency said.
Global
oil demand will increase by a total of 6.9 million barrels a day to reach 104.7
million a day by 2023, with China remaining the “main engine of demand growth.”
That’s an average annual growth rate of about 1.2 million barrels a day, little
changed from last year’s forecast.
Source: Bloomberg