The supply surge from US shale oil and gas will beat the biggest gains seen in the history of
the industry, the International Energy Agency predicted.
By 2025, the growth in
American oil production will equal that achieved by Saudi
Arabia at the height of its expansion, and increases in natural gas
will surpass those of the former Soviet Union, the agency said
in its annual World Energy Outlook. The boom will turn the US, still among the biggest oil
importers, into a net exporter
of fossil fuels.
“The implications of the shale revolution for international markets and energy security have been profound,” said the Paris-based IEA, which advises most of the world’s major economies on energy policy. US drillers have “weathered the turbulent period of lower oil prices since 2014 with remarkable fortitude.”
While oil prices have recovered to a two-year high near $65 a barrel, they’re still about half the level traded earlier this decade, as the global market struggles to absorb the scale of the US bonanza. It’s taken the Organization of Petroleum Exporting Countries and Russia almost 11 months of production cuts to clear up some of the oversupply.
The IEA raised estimates
for the amount of shale oil that can be technically recovered
by about 30 percent to 105
billion barrels. Forecasts for shale-oil output in 2025 were bolstered by 34 percent to
9 million barrels a day.
US shale “has emerged from its trial-by-fire as a leaner and hungrier version of its former self, remarkably resilient and reacting to any sign of higher prices caused by OPEC’s return to active market management,” the agency said.
Reflecting the expected flood of supply, the IEA cut its forecasts for oil prices to $83 a barrel for 2025 from $101 previously, and to $111 for 2040 from $125 before.
Lower prices are helping to support oil demand, and the IEA raised its projections for global consumption through to 2035, despite the growing popularity of electric vehicles. The world will use just over 100 million barrels of oil a day by 2025.
As US shale output will decline from the middle of the next decade, and investment cuts take their toll on other new supplies, the world will become increasingly reliant once again on OPEC, according to the report. The cartel, led by Middle East producers, will see its share of the market grow to 46 percent in 2040 from 43 percent now.
Yet that could still change, the IEA said. As shale has outperformed expectations so far, the IEA added a scenario in which the industry beats current projections. If shale resources turn out to be double current estimates, and the use of electric vehicles erodes demand more than anticipated, prices could stay in a “lower-for-longer” range of $50 to $70 a barrel through to 2040. “There could be further
surprises ahead,” the IEA said.
Oil stays near $57 as OPEC boosts ’18 demand estimate
Traders played follow-the-bouncing-ball with oil prices that fluctuated within an
85-cent range before settling in little changed on a day OPEC boosted its demand projections for 2018.
Futures in New York rose as much as 0.7 percent at one point, breaching $57 a barrel. They then fell 0.8 percent, before settling in at a mid level between the two that left prices little changed. OPEC raised its estimates for the amount it will need to pump to meet demand next year by 400,000 barrels a day to 33.4 million a day, according to a monthly report from the group.
“With OPEC raising estimates, there’s an expectation that the market’s a lot tighter,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, in a telephone interview. “We’ve gone from mentality of glut, glut, glut, to more rebalancing.”
Oil has climbed about 20 percent since the start of
September as global suppl-
ies tighten and speculation mounts that the Organization of Petroleum Exporting Countries will extend output curbs past the end of March. OPEC Secretary-General Mohammad Barkindo described the production curbs as the “only viable option” to rebalance a global market still contending with excess supply.
Prices have also been boosted by internal upheaval in Saudi Arabia, OPEC’s biggest member, and escalating tensions with its rival and fellow producer Iran. An oil pipeline between Saudi Arabia and Bahrain halted briefly over the weekend following an attack. “Without this fervor being continually fanned, prices are vulnerable to falling back,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, by telephone.
At the same time, crude stockpiles at the storage hub in Cushing, Oklahoma fell 1.9 million barrels to 64.6 million in the week ended Nov. 10, Genscape said, according to people familiar with the report. The dip comes after the Energy Information Administration reported supplies in the previous week were at the highest seasonal level going back to 2004.