OPEC Sees Competition With U.S. Shale Oil Subsiding After 2023

By Anonymous

ALGIERS—U.S. shale oil production will peak by the late 2020s, triggering renewed demand for OPEC crude after an expected decline and stagnation, the oil cartel said Sunday.

In its latest forecast on the global oil landscape, the Organization of the Petroleum Exporting Countries said it expects U.S. shale growth to “slow significantly” after 2023, before peaking at 14.3 million barrels a day between 2027 and 2028. Output should then fall to an average of 12.1 million barrels a day by 2040, according to OPEC.

The use of hydraulic fracturing in the U.S. to drill for oil in shale rock—known as fracking—has dramatically reshaped the face of the global oil industry over the past decade, rivaling OPEC for market share. Shale was largely behind a glut of American oil that flooded the market over four years ago, leading oil prices to fall to $30 a barrel from more than a $100 a barrel in late 2014.

In 2018, U.S. shale production is growing faster than it did during the boom years of 2011 to 2014, the International Energy Agency said earlier this year. The IEA has forecast that U.S. shale oil production will plateau in the late 2020s, while total non-OPEC production should decline.

OPEC projects that “the strongest annual increases are seen in the near-term, in which total U.S. tight oil increases by an average of 1.4 million barrels a day” annually from this year to 2020.

The world’s appetite for OPEC crude, meanwhile, should fall to 31.6 million barrels a day in 2023, compared with 32.6 million barrels a day in 2017, before again rising to current levels when U.S. shale supply peaks, the cartel said.

“Thereafter, a gradual decline in non-OPEC liquids supply, coupled with moderate, but sustained global demand growth, leads to a steady increase in demand for OPEC crude, which rises to nearly 40 million barrels a day by 2040,” the OPEC report noted.

OPEC’s updated outlook comes as the oil cartel is meeting in Algiers with its partner producers, including Russia. The discussion centers on whether producers should raise crude production levels and supply more oil to global markets, amid continued pressure from President Trump to rein in rising prices.

More broadly, OPEC on Sunday also said it expects global demand for oil to increase by an average of 1.2 million barrels a day in the medium-term, reaching 104.5 million barrels a day by 2023. But the cartel said it expects growth to “decelerate over time,” reaching 111.7 million barrels a day in 2040. That’s up from its forecast last year for 2040 of demand of roughly 107.5 million barrels a day.

The cartel has said it doesn’t expect global demand for oil to peak before 2040. That’s largely in line with the forecast of the International Energy Agency, which has argued that global oil demand will grow slowly past 2040.

However some international oil majors, including Royal Dutch Shell PLC and Norway’s Equinor AS A, predict demand could reach its high as soon as 2025 or 2030. The UK’s BP PLC said in February that the world’s thirst for oil could grow until around 2035, hitting around 110.3 million barrels a day, before plateauing and falling off in the run-up to 2040.

Write to Christopher Alessi at [email protected]