U.S. shale will grow even faster than expected

Head of OPEC Mohammed Barkindo
Head of OPEC Mohammed Barkindo

OPEC said shale oil production will grow considerably faster than expected over the next four years after the group’s output cuts triggered a crude-price recovery that helped U.S. producers. As Bloomberg writes in an article "OPEC Now Says U.S. Shale Will Grow Even Faster Than They Previously Thought", North American shale output will soar to 7.5 million barrels a day in 2021.

According to the Organization of Petroleum Exporting Countries' World Oil Outlook report, published on Tuesday, that’s 56 percent higher than it forecast a year ago. The revised outlook illustrates OPEC’s dilemma: with supply curbs also helping its rivals, demand for the group’s crude will remain little changed until shale oil output peaks after 2025. U.S. shale oil “most strikingly” exceeds previous expectations after showing the “resilience and ability to bounce back,” OPEC said. “This growth is heavily front-loaded, as drillers seek out and aggressively produce barrels from sweet spots in the Permian and other basins.”

OPEC assumes shale oil production growth will mostly originate from the U.S., with some contribution from Canada, Argentina and Russia over the forecast period to 2022. North American shale production for 2017 is now seen at 5.1 million barrels a day, up by almost a quarter from last year’s World Oil Outlook report.

OPEC and its partners, including Russia, are meeting in Vienna on Nov. 30 to decide whether to extend the deal to curb production beyond the end of March. Since Jan. 1, they’ve targeted output cuts of about 1.8 million barrels a day in a bid to reduce global stockpiles.

Brent crude has rebounded more than 10 percent this year, trading at more than $62 a barrel in London.

OPEC expects shale oil production to peak after 2025 and decline from about 2030. OPEC will then be required to increase its own output from about 33 million barrels a day in 2025 to 41.4 million in 2040, according to the report.

OPEC raised its forecast for global oil demand by 2.3 million barrels a day in 2021 compared with last year’s report. The group said demand growth will be particularly robust in 2020 as regulations to reduce shipping pollution kick in, leading to higher refinery runs to provide the required fuels. OPEC also raised its oil demand forecast in 2040 by 1.7 million barrels a day to about 111 million barrels. China and India will lead the demand growth, offsetting declines in developed nations, it said.

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