Higher oil prices, robust oil demand growth, and higher upstream activity will lead to faster-than-previously-expected growth in U.S. shale production until 2022, OPEC said in its World Oil Outlook 2017 published on Tuesday.
Compared to last year’s annual OPEC outlook, the medium-term outlook for non-OPEC liquids growth has “changed quite considerably”, the cartel said, citing the “US tight oil sector’s resilience and ability to bounce back.”
“Most strikingly, US tight oil production has exceeded previous growth expectations and is currently forecast to contribute to a rise in overall US liquids by some 0.6 mb/d in 2017 and then 0.9 mb/d in 2018. This contrasts with an annual decline in US liquids in 2016, overall non-OPEC production. In the medium-term, total non-OPEC liquids are forecast to grow by 4.9 mb/d to 62 mb/d in 2022, of which 3.8 mb/d is incremental supply from the US alone,” said the organization which is trying to ‘fix’ the global oil market by deliberately withholding production to draw down inventories and prop up oil prices.
It’s the oil price gains and resilience of U.S. shale that has prompted OPEC to revise up its expectations for U.S. and Canada’s combined tight oil production to 7.9 million bpd in 2022, up by 3.3 million bpd from 2016. Related: Is A Venezuelan Default Inevitable?
“Non-OPEC supply growth is overwhelmingly driven by higher tight oil production, predominantly in the US and to a lesser extent elsewhere. This growth is heavily front-loaded, as drillers seek out and aggressively produce barrels from sweet spots in the Permian and other basins,” OPEC said.
However, the cartel noted that “US tight oil is by far the most important contributor to non-OPEC supply, but peaks after 2025”. And after that demand for OPEC crude—while it will be “quite flat” until 2025—is expected to rise sharply, the organization said, in a sign that it believes that the market share wars are far from over.
By Tsvetana Paraskova for Oilprice.com
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