US Oil Production to Drive World Supply in Next 5 Years

US Oil Production to Drive World Supply in Next 5 Years

Oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) and other global oil players are set to gather in Houston as CERAWeek, the largest energy industry conference, begins on Monday. Likely, they won't like what they hear. If prices rise, rather than fall, in the next few years, USA shale production could grow even faster than the IEA predicts, and demand for OPEC crude would be correspondingly lower. Citing the production capabilities of drillers operating in USA shale fields, the world capacity to produce oil will hit 107 million barrels a day. The United States will lead the way with production growth of 3.7 million - almost as much as the entire production of Iran - OPEC's second largest oil producer.

A further increase in USA output also weighed on prices.

Prices briefly pared losses after data from the Energy Information Administration said USA crude inventories rose by 2.4 million barrels in the last week, compared with analysts' expectations for an increase of 2.7 million barrels. "This conference is a field trip for OPEC to a different reality in oil".

Environmentalists, scientists and some energy analyst question whether the world is rapidly approaching a "peak demand" scenario as policies are enacted to reduce carbon emissions from burning coal, oil and natural gas.

"US shale production is going to continue growing strongly", said Mike Loya, the Houston head of Vitol Group, the world's top independent oil trader. Trading with state owned PDVSA is becoming more hard but Venezuela has been using us tight oil as a diluent for its heavy oil. Output hit a record 10.057 million bpd in November, according to the US Energy Department.

General Electric's Bake Hughes unit reported on Friday that the United States energy companies increased 1 oil rig in the week that ended in March 2. "If you are a shale-oil producer, who brought you back?"

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The company's valuation, therefore, depends on a long-term view of oil prices through multiple cycles, rather than the current price, as well as its tax treatment and other factors. It has been seeking a long lasting condominium with Russian Federation to prevent a return to destabilizing competition for market share.

US output has also dented sentiment. Russian Federation is also looking to sell more oil and gas eastwards.

Between 2011 and early 2014, OPEC focused on supporting prices, despite losing market share to USA shale firms. But in the age of US oil abundance, OPEC's Gulf members are questioning whether this approach continues to make sense.

"Upstream investment may be inadequate to avoid a significant squeezing of the global spare capacity cushion by 2023, even as costs have fallen and project efficiency has improved", the IEA says. All comments are subject to editorial review. That, combined with demand growth, means that the oil industry needs to replace "one North Sea each year", the IEA says.

Starting in June 2014 and lasting through June 2016, the organisation switched to focus on protecting and rebuilding market share, allowing prices to collapse. The energy group forecasts that the USA will supply enough oil to meet 80 percent of the growing demand over the next three years, and Canada, Brazil and Norway will meet the rest.

"The United States is set to put its stamp on global oil markets for the next five years", said Fatih Birol, IEA executive director, "but as we've highlighted repeatedly, the weak global investment picture remains a source of concern".

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