INTERACTIVE: 89% of non-OPEC 2018 supply growth from US – OPEC

Author: Tom Brown


LONDON (ICIS)--Nearly 90% of the projected 1.7m bbl/day crude supply growth expected this year from non-OPEC countries is likely to come from the US, with the country also standing as the key driver of global uncertainty in the market, club of oil-producing nations OPEC said on Monday.

Investment in the US unconventional oil industry rose 42% year on year in 2017 to $138bn compared to a 2% rise in overall non-OPEC capital expenditure over the same period as easy access to capital and cheap debt drove to an explosion in output, buoyed by firming oil prices, OPEC said.

Falling costs and increasing efficiency, coupled with lower well costs as producers became more efficient at recovery in shale oil wells, drove a 40% drop in average West Texas Intermediate breakeven pricing for US tight oil.

Improving conditions for shale-derived oil and gas pushed total US capacity past the 10m bbl/day mark in November last year, with the country expected to account for 1.5m bbl/day of the projected 1.7 m bbl/day supply growth from non-OPEC producers this year.

Total shale spending is expected to rise 20% year on year in 2018 and 16% in 2019, with the bulk of investment expected to flow into the US, compared 3.5% for total non-OPEC spending this year and 8.1% the next as producers start to increase their capital expenditure.

However, US trade policy is also driving global market unease, OPEC added, citing the potential trade war with China, tariffs on steel and aluminium, the breakaway from the Iran nuclear deal, and prolonged North American Free Trade Agreement (NAFTA) talks.

“So far the impact on the global economy has been minor and negligible, but the build-up of potentially disruptive concerns has increased,” OPEC noted in its monthly oil market report.

The expected resumption of US sanctions against Iran has sent oil prices spiking due on expectations that global trade in Iranian cude will be curtailed. OPEC has not yet signalled what this may mean for its supply cut accord, but stated that it “stands ready to support oil market stability”.

OPEC production rose by 12,000 bbl/day to an average of 31.93m bbl/day in April compared to March when compliance with the cartel’s supply cut agreement reached 149%, driven in part by the Venezuela economic crisis.

April say Saudi Arabia and Algeria increase output, but this was partially offset by lower production in Venezuela, Gabon and Nigeria, the cartel added.

Global economic growth forecasts were left unchanged at a 3.8% overall GDP increase for the year, while OPEC revised up its world oil demand growth estimate by 25,000 bbl/day to 1.65m bbl/day for 2018 on the back of firmer OECD data.

Global non-OPEC crude supply supply estimates were stable to firmer at 59.62m bbl/day, an increase of 0.01m bbl/day from the previous month.

(Picture source: Design Pics Inc/REX/Shutterstock)

(Update adds infographic)