US to drive 2023 non-OPEC crude supply growth

Tom Brown


LONDON (ICIS)–US crude oil production is expected to make up the bulk of supply growth among non-OPEC countries in 2023, balanced against declines in Russia and Mexico, OPEC said on Tuesday.

US output is expected to comprise 75% of regional year-on-year production increases in 2023, driven by tight oil production from shale plays, despite the onshore sector in the country remaining focused on shareholder returns over output growth as of the close of 2022, the cartel said.

Overall non-OPEC supply increases by country are expected to be fairly muted next year according to OPEC, with total growth expected to average 1.5m bbl/day in 2023 compared to 1.9m bbl/day this year, with start-up of fresh offshore capacity in Latin America and the North Sea also drivers.

Non-OPEC upstream investment is expected to continue growing next year at a reduced pace, from a 19% annual increase in 2022 to $424bn to an 8% uptick in 2023 to $459bn.

The focus on returning cash to shareholders, as well as the impact of inflation, supply chain disruption and higher production costs have all limited the pace of the US shale oil and gas sector recovery this year.

The US onshore rig count fell to 780 last week, the lowest level since July 2022, as crude pricing dropped around $9/bbl over that five-day period.

The closure of the Keystone pipeline in North America in the wake of massive leaks and the easing of COVID-19 social control measures in China has firmed slightly crude prices this week, but WTI pricing of around $74/bbl on Tuesday remains substantially below levels of over $90/bbl in early November.

The pace and extent of the price falls has cooled growth in the US shale space, but break-even prices in the space remain extremely low, in the $30s and $40s per barrel in some plays and even the higher-cost end of the market remaining below $70/bbl according to 2022 Statista estimates.

Global oil demand growth for 2022 and 2023 is expected to stand at 2.5m bbl/day in 2022 and 2.2m bbl/day in 2023, OPEC said, unchanged from its forecasts the previous month.

Growth expectations for next year are overwhelmingly driven by non-OECD countries, with the member countries of the organisation forecast to make up 300,000 bbl/day of total growth amid widespread anticipated economic torpor in the developed world.

Stronger-than-expected third-quarter growth in some regions has driven a slight upward revision of 2022 GDP expectations, to 2.8%, while global economic growth forecasts for 2023 are unchanged from OPEC’s November estimates at 2.5%.

Despite the forecast annual drop in global GDP next year, downside risks to that figure abide, according to the cartel.

“This forecast is subject to many uncertainties including global economic developments, COVID-19 containment measures, mainly in China, and ongoing geopolitical tensions,” OPEC said.

Front page picture: Pump jacks on the Fort Berthold Indian Reservation, in US’ North Dakota 
Source: Matt Brown/AP/Shutterstock 

Focus article by Tom Brown


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