Booming US oil production expected to meet most of world's demand

IN front of the Petroleum Club of Midland, Texas-capital of the booming Permian shale region-an electronic display flashes two crucial pieces of information: the oil price and the number of drilling rigs.

Increases in US production alone will cover 80 percent of the world's demand growth in the next three years - with Canada, Brazil and Norway covering the rest, the report said.

But the rise in the latter inevitably threatens the former. He also said he expects United States export capacity to double over the next five years.

Crude prices rose higher on Monday, boosted by hopes for new output cuts prior to a meeting between OPEC leaders and United States shale producers later in the day. Even though market fundamentals and prices have moved in their direction over the past year or so, major oil-producing states are still jittery about growth in US shale and another possible price fall. And we see now that the silent shale revolution is very, very loud. The fall in investment, coupled with drop in oil prices, also demolished benchmark crude futures from $100 in 2014 to $30 in 2016. "It is thus an illusion for Opec to think about abandoning the agreement to cut production".

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015.

Last year, ExxonMobil Corp. and Saudi partner Saudi Basic Industries Corp. agreed to develop a world-class ethane steam cracker near Corpus, which if given final approval would be able to produce 1.8 million metric tons/year of ethylene.

Venezuela's oil production is running 1.5 million barrels per day (bpd) short of its historic output but it is something that the country must address itself, Ecuador oil minister Carlos Perez said.

In the same context, Moscow has made an announcement via the Deputy Energy Secretary Alexey Texler that it does not wish to become a member of the OPEC but seeks a special relationship of co-operation with the fourteen producer countries that make up the organisation. But in the age of US oil abundance, OPEC's Gulf members are questioning whether this approach continues to make sense. They cite this risk as a reason to keep oil prices high. In Houston Monday night, both sides had dinner on the sidelines of the CERAWeek by IHS Markit conference. This is mainly due to the strong recovery in production in the United States, which reached 10.28 million barrels per day (its historic maximum).

Meanwhile, Opec oil ministers, U.S. shale oil producers and other global oil industry leaders gathered in Houston as CERAWeek, the largest energy industry get-together, kicked off on Monday.

This year's CERAWeek conference continues outreach between the Organization of the Petroleum Exporting Countries and shale producers.

Which brings me back to the IEA.

Oil & gas industry needs $20 trillion to meet demand in next 25 years. It is clearly anxious about its market sway, and formalizing its partnership with non-OPEC allies would give it broader influence.

In Houston it's unlikely shale producers will bow to Opec. Investors, exhausted of losses, are demanding shale companies focus on returns, rather than just growth. However, it will inevitably drive up costs for the nation's oil and gas producers.

Brent for May settlement was 52 cents higher at $66.06/bbl on the London-based ICE Futures Europe Exchange, after rising $1.17 on Monday.

The IEA sees demand for OPEC oil actually declining in absolute terms over the next few years as it is edged out of the market by non-OPEC supply. The EIA expects that USA will supply much of the world's additional oil for the next few years. And with US production expected to keep surging, OPEC's caps may prove less effective in boosting prices.

  • Kyle Peterson