• 5 minutes Trump vs. MbS
  • 9 minutes Saudis Threaten Retaliation If Sanctions are Imposed
  • 15 minutes Can the World Survive without Saudi Oil?
  • 23 mins WTI @ $75.75, headed for $64 - 67
  • 13 hours The Dirt on Clean Electric Cars
  • 3 hours These are the world’s most competitive economies: US No. 1
  • 3 hours The end of "King Coal" in the Wales
  • 1 hour Closing the circle around Saudi Arabia: Where did Khashoggi disappear?
  • 19 hours Uber IPO Proposals Value Company at $120 Billion
  • 3 hours Saudi-Kuwaiti Talks on Shared Oil Stall Over Chevron
  • 3 hours Coal remains a major source of power in Europe.
  • 23 hours COLORADO FOCUS: Stocks to Watch Prior to Midterms
  • 9 hours EU to Splash Billions on Battery Factories
  • 10 hours Poland signs 20-year deal on U.S. LNG supplies
  • 24 hours Saudis Pull Hyperloop Funding As Branson Temporarily Cuts Ties With The Kingdom
  • 23 hours Nopec Sherman act legislation
Alt Text

A New Era Of Geopolitical Risk In Global Oil Markets

The geopolitical landscape in oil…

Alt Text

The Implications Of A Fractured U.S., Saudi Alliance

With tensions between the United…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

More Info

Trending Discussions

OPEC To Rule Oil Markets Till Peak Demand

OPEC

OPEC will continue to play a key role in oil supply and prices in the global oil market through 2040, despite the relentless oil production in the Permian and expectations for production increases in the United States and other non-OPEC countries in the 2020s.

That’s the takeaway from Wood Mackenzie’s latest long-term outlook for global oil supply.

Oil production from outside OPEC—U.S. onshore and conventional projects mostly in Brazil and Canada—will help ensure adequate global oil supply through 2030, but U.S. production is expected to peak in the mid to late 2020s, leading to a decline in growth for non-OPEC liquids production, and even a decline in production after 2030, according to the energy consultancy.

At the same time, after the mid 2020s, OPEC’s role and importance on the oil market will become more prominent in ensuring upstream investment to meet global oil demand growth and offset declines from maturing assets, WoodMac says.

“With demand continuing to grow through to its peak in the mid-2030s, the industry must find increasingly expensive oil to offset declines from a maturing asset base. To balance the market in the long-term, there is increasing reliance on OPEC continuing to exploit its available reserves,” according to the analysts. They also point out that “as reliance on OPEC ramps up, so does the importance of geopolitical risk as a key determinant for both supply and price.”

U.S. onshore production won’t be able to meet global oil demand growth on its own, so conventional projects would need to step in to fill the supply gap, WoodMac reckons.

Related: U.S. Poised To Ease Biofuel Quotas

“As non-OPEC production growth slows and the importance of OPEC’s output increases from 2023, OPEC’s role in managing prices becomes more focused on ensuring upstream investment keeps up with replacing lost barrels from onstream declines, and the growth in oil demand over the next decade or so,” it said.

To be sure, supply from the United States is breaking production records and will continue to do so in the next few years, despite the Permian takeaway capacity constraints.

EIA’s latest Short-Term Energy Outlook (STEO) from July expects total U.S. crude oil production to average 10.8 million bpd this year, up by 1.4 million bpd from last year. In 2019, U.S. crude oil production is forecast to average 11.8 million bpd.

“Crude oil production at these forecast levels would probably make the United States the world’s leading crude oil producer in both years,” according to the EIA. 

The Permian is seen pumping 4.0 million bpd by the end of 2019—this is 600,000 bpd more than estimated June 2018 levels and would account for around one-third of total U.S. crude oil production at the end of 2019. Yet, the expected annual average growth for the Permian in 2019 is 400,000 bpd lower than in 2018, reflecting increasing pipeline capacity constraints, the EIA said last week.

Some analysts, like IHS Markit, predict “stunning” Permian growth until 2023, with production expected to reach 5.4 million bpd by then—more than the current production of all OPEC members except for Saudi Arabia. Related: Chinese Oil Demand Growth Could Slow Down Soon

According to WoodMac, by 2030, Brazil and Canada will grow the most after the U.S., but after that it will be OPEC that will set the pace of supply and oil prices.

By the late 2020s, non-OPEC supply growth will depend on additional new sources of supply, and some of them will be higher cost. By 2030, around 6 million bpd of oil supply—mostly yet-to-find, contingent resources and fringe plays in the U.S.—is expected to break even above $70 per barrel. By 2040, the volume of supply breaking even at above $70 a barrel could be as much as 11 million bpd, WoodMac says.

“Key regions like Latin America and West Africa hold vast potential, but higher prices are needed to support activity as the cost curve is now higher,” according to the consultancy.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:


x


Back to homepage

Trending Discussions


Leave a comment
  • Mamdouh G Salameh on July 18 2018 said:
    In a research paper titled:” A Post-Oil Era Is a Myth” published by the United States Association for Energy Economics on the 8th of December 2016 (USAEE Working Paper No: 16-290), I argued forcefully and convincingly that there will not be a post-oil era and that oil will continue to reign supreme throughout the 21st century and far beyond.

    If this is the case, then here could never be a peak oil demand anytime during this century and far beyond. Projecting a peak in oil demand becomes more of a wishful thinking than a realistic projection.

    My conclusion then is that if neither a post-oil era nor a peak in oil demand are in sight during the 21st century and far beyond, then OPEC which accounts for 71.8% of global proven oil reserves and 42.6% of global production will continue to play a key role in oil supply and prices in the global oil market well beyond the 21st century.

    The only exception is a breakup of OPEC resulting from Saudi Arabia withdrawing from the organization and forming a pact with Russia or Iraq with its huge oil potential in terms of production and proven reserves deciding to go its own way. However, these two prospects are slim.

    The one certain thing is that oil is expected to remain the world’s primary energy source throughout the 21st century and probably far beyond. A major underpinning factor is the growing world population.

    This trend will continue despite vehicle efficiency improvements driven by technological developments, a tightening of energy policies and a relatively low (albeit increasing) penetration of electric vehicles (EVs).

    And whilst US oil production is increasing, the prospect of the US becoming oil self-sufficient is not a realistic proposition for the foreseeable future.

    With a US domestic consumption of 20.08 million barrels a day (mbd) in 2018 and a production of 10.8 mbd, the US must import 9.28 mbd to make ends meet. Its dependence on foreign oil imports will continue unabated for the foreseeable future.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Jhm on July 18 2018 said:
    What makes WoodMac so sure that demand will keep growing out to 2030 with oil at $70/b? The cost of battery packs keep falling and become competitive with oil at $20/b (the price where crude becomes competitive for generating electricity) as pack cost falls below $100/kWh (at parity with the coat of an internal combustion drivetrain). It is absurd to think that oil will command a price of $70 in the face of competition at parity with $20.

    WoodMac analysts need to go back to the drawing board and first get a view on oil price parity with battery packs. Oil will lose market share rapidly to batteries and renewables at prices substantially above parity. The only path to oil demand peak as late as 2036 is where oil remain at or below parity with battery packs. Any price path well above parity will meet with a much earlier demand peak and faster decline post-peak. WoodMac analyst seem to fail to understand that you cannot have both high oil prices and a late demand peak.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News