OPEC Expects To Shrink Supplies Until US Shale Peaks

The 2019 World Oil Outlook projects tight-oil supplies to rise to at least 75% of total US production before retreating.

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OPEC predicts that it will become a smaller supplier of the world’s crude stocks over the next 5 years as US tight oil supplies continue to rise.

This is according to OPEC’s 2019 World Oil Outlook, which said the cartel’s contribution will drop from 2018’s figure of 36.6 million B/D to an average of 32.8 million B/D in 2024. The projected rebound begins in 2025 as OPEC supplies rise to 33.4 and eventually swell to 44.4 million, when total global demand is pegged to be around 110.6 million B/D.  

All of these figures will hinge in large part on whether US shale output peaks in the next decade.

OPEC projects that to happen sometime after 2024 when oil production from US shale fields tops out at 16.9 million B/D. The figure will by then represent 75% of total US production, estimated to be 22.8 million B/D.

According to OPEC’s report: “While tight oil will remain immensely important to the US and overall non-OPEC supply growth, it is worth pointing out that current projections indicate that it may have seen its strongest annual growth in 2018, when it increased by 2.2 million B/D. The 2019–2024 period is expected to see slower, albeit still sizeable, growth, averaging 1.1 million B/D, ahead of an expected peak in the late 2020s.”

In the medium-term, OPEC has revised US tight oil supplies “up sharply” noting that despite the current financial headwinds, “prospects for growth remain given that efficiency and technology gains have further increased.” The organization emphasized that new reservoir diagnostics and advanced software technologies, such as artificial intelligence, are poised to enhance all major aspects of the hydraulic fracturing and production processes. 

Other sources of non-OPEC supply are expected to have a “meaningful medium term-impact,” especially in mature basins such as Norway’s portion of the North Sea and offshore Brazil and Guyana.

Other Key Takeaways

  • The global population is expected to increase by almost 1.6 billion people, from around 7.6 billion in 2018 to 9.2 billion in 2040. The majority of this growth is forecast to occur in developing countries (more than 90%), particularly in the Middle East and Africa (41%)
  • Internal-combustion engines will continue to play an important role in the transportation sector, with substantial development potential for improved fuel efficiency
  • Electric vehicles and plug-in hybrids will reach 320 million units by 2040, accounting for 13% of the global fleet. Recycling will be vital in helping electric vehicles become less resource and energy-intensive.
  • Combined cycle gas turbines have by far the lowest, and coal-fired power plants the highest, specific CO2 emissions of fossil fuel technologies used in power generation
  • Future renewable power generation is expected to come mainly from wind and solar, although the associated capacity factor needs to be considered for a correct interpretation of capacity build up
  • Data collection, data processing, and artificial intelligence are making impressive advances and are increasingly shaping the energy business.

OPEC’s 2019 World Oil Outlook can be downloaded here.