USA oil output surge dominating global crude growth, IEA says

OPEC Secretary General Mohammad Barkindo and other OPEC officials are expected to hold a dinner on Monday with U.S. shale firms on the sidelines of the conference

A global energy watchdog says booming production in the United States will meet 80 percent global growth in demand for oil over the next five years. More investments will be needed to make up for declining oilfields. The continuous investment is essential because the world is losing about 3 million barrels each year due to the aging of oil fields.

With total liquids production reaching almost 17 million bpd in 2023, up from 13.2 million in 2017, the United States will be by far the world's top oil liquids producer. "Without large-scale capital investment, the USA domestic market can only absorb about a quarter of the additional four million b/d of US crude expected to enter markets [by] 2023, leaving the rest for exports", Wood Mackenzie said.

In its flagship publication, World Energy Outlook-2017 issued last fall, IEA said resilient shale and tight resources production had cemented the United States as the biggest producer in the world.

"We can not ignore the growth coming from shale", IEA Executive Director Fatih Birol told reporters at a briefing as CERAWeek kicked off. Because of investments in pipelines and other infrastructure to ease the current bottlenecks, domestic crude export capacity is forecast to hit almost 5 million b/d by 2020.

"If you dive into the numbers, you see that there is a growing interest in the short-cycle projects", IEA Executive Director Fatih Birol said, referring to USA shale oil and gas, while participating in a panel discussion with Barkindo regarding oil markets.

Meanwhile, gasoline stocks fell by 788,000 barrels, a smaller decline than the 1.2 million barrel drop forecast by analysts in a Reuters poll. Cheniere Energy Inc. is also advancing plans to export LNG from a new terminal near Corpus, with the first train ready in 2019. The Organization of Petroleum Exporting Countries (OPEC) is now working to reduce global oil surplus.

Tanker rates from the United States to Asia have also been rising recently, with the cost of shipping a tonne of oil from Houston to China TC-HOU-DLC assessed by Thomson Reuters at $29.01 on March 2, up from $18.44 at the start of February and $16.79 in late September a year ago.

U.S. crude oil production has already risen past that of top exporter Saudi Arabia to 10.28 million barrels per day
U.S. crude oil production has already risen past that of top exporter Saudi Arabia to 10.28 million barrels per day

But the price rebound has also encouraged US shale companies to pump more oil, and total USA production has topped 10 million barrels a day and toppled near-half-century record in November.

The IEA may be under-estimating non-OPEC production, and over-estimating global consumption, both of which could lower demand for OPEC crude compared with the baseline.

Underscoring his apprehension regarding long-term investments, Birol said that IEA tracked an annual decline in funding to the tune of 25% for two years straight, in 2015 and 2016.

Demand for ethane will expand at the fastest pace in the next five years, rising by 885,000 bpd, followed by naphtha with growth of 495,000 bpd and LPG with growth of 40,000 bpd, it forecast.

More stringent policies to curb air pollution and the increasing use of electric transport are expected to slightly slow this demand growth. The parallels between the last shale boom and the current surge are uncomfortably close, and the bad news for OPEC does not stop there. Best C-suite guesses from Texas are that a sustained $50 to $60 oil price could result in a fifteen million b/d mark for USA production in the 2020s, up from ten million b/d now.

"Global oil trade routes are moving East, as China and India replace the United States as top oil importers". The IEA, for instance, sees global demand growing by an average of 1.2 Mbd per year through 2023, reaching 105 Mbd.

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