IEA Sees American Energy Players Squeezing OPEC

Demand for OPEC’s crude won’t significantly rise above current output until 2021.Demand for OPEC’s crude won’t significantly rise above current output until 2021.

The US will dominate global oil markets for years to come, satisfying 80% of global demand growth to 2020 as the shale boom keeps OPEC under pressure, the International Energy Agency said.

“The US is set to put its stamp on global oil markets for the next five years,” IEA Executive Director Fatih Birol said in a report published on Monday, Bloomberg reported.

OPEC’s surging rivals, which include Brazil and Canada, will leave little space for the organization to expand even after its production curbs expire this year.

New US output will cover 80% of global oil demand growth over the next three years.

The Organization of Petroleum Exporting Countries is riding high right now, defying the skeptics by going deeper than their pledged cuts and maintaining them for long enough to deplete bloated oil inventories.

However, the ensuing price recovery has “unleashed a new wave of growth from the US”, said the Paris-based IEA, which advises most of the world’s major economies.

Thanks to the shale boom, new US supply will cover more than half the world’s oil demand growth to 2023, the agency said. Production from the prolific Permian Basin will double over the period and the country’s total liquid hydrocarbon output will rise to 17 million barrels a day from 13.2 million last year.

The bullish forecast kick-starts the annual CERAWeek conference, a gathering of thousands of oil executives, traders, bankers and investors in Houston.

The American surge and a slightly weaker outlook for global demand growth make uncomfortable reading for OPEC.

The IEA slashed projections for the amount of crude needed from OPEC, indicating its supply cuts would need to stay in place until 2021 to avoid creating another prolonged surplus.

Demand for OPEC's crude won't significantly rise above current output until 2021.

Closer to 2023, global markets will start to tighten and the IEA warned that more investment is needed to meet growth in consumption and to make up for production lost to natural declines.

OPEC will struggle to start new production of its own. The IEA’s five-year outlook for new output capacity from the group was reduced by about 62% from the previous report. The group will add 750,000 barrels a day by 2023—just 2.1%—as gains in Iran and Iraq are offset by economically troubled Venezuela, where capacity will slump to the lowest since the 1940s.

There’s a risk the wider industry may also fall short after an unprecedented drop in spending from 2015 to 2016, and little sign of a rebound in the subsequent two years, the IEA said.


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