Newly-productive projects coming online in Russia, Brazil and Canada, coupled with new shale gas output in North America, could add an additional 1m bbl/day to global oil supply between 2017 and 2019, according to OPEC.
The news comes as OPEC cornerstone Saudi Arabia is reported to be lobbying to extend the production cuts by OPEC and some non-OPEC states brokered in late 2016 and currently slated to run until this June.
Instituted to tighten global oil supply and stabilise prices, the agreement has seen OPEC crude production fall by 153,000 bbl/day month on month in March, according to OPEC Secretariat data based on secondary sources.
The most significant drop was seen in Libya, where the country’s largest oilfield, El Sharara, is said to have gone offline amid conflict.
Despite the sharp projected uptick in non-OPEC supply through to 2019, the investment decision on many of those projects had been made in a different era for crude oil, OPEC said.
“Many of these projects, costing billions of dollars and taking many years to bring online, were initiated back when oil prices traded at $100/bbl,” the group said in its monthly oil report.
The cartel cut its estimates of 2016 non-OPEC supply by 30,000 bbl/day to 57.32m bbl/day, a year on year contraction of 690,000 bbl/day, while global demand growth for the year were left broadly unchanged at 1.38m bbl/day at an average of 95.05m bbl/day.
Oil demand growth among OECD nations for 2017 was left unchanged from OPEC’s previous estimate at an increase of 240,000 bbl/day year on year, with a projected third-quarter peak buoyed by the US summer driving season.
The only section of OECD nations where oil demand is expected to contract year on year in 2017 is Asia Pacific – comprising South Korea and Japan – due to a drop in Japanese demand.
Preliminary data for February also showed a decrease in demand of 150,000 bbl/day year on year for the four key European economies, as declines in Italy and the UK offset growth in France and Germany.
European demand could be driven by strengthening industrial production and automotive demand, but “substantial” downside risks exist, chiefly the possibility off the collapse of the economic recovery in the region and the growing popularity of alternative-fuel vehicles.
European oil demand grew 250,000 bbl/day in 2016 and growth expectations are much lower for this year, OPEC said, but demand in the region is expected to be a fraction of that this year, at around 70,000 bbl/day. (Picture source: Olaf Kruger / imageBROKER/REX/Shutterstock)