The second wave of shale revolution is coming, Fatih Birol, the executive director of the Paris-based International Energy Agency (IEA), says in the annual five-year oil outlook.
The United States is set to drive global oil supply growth over the next five years, adding another 4 million barrels per day (bpd) to the country’s already booming output, the IEA outlook noted. The report released last week coincided with CERAWeek, the annual industry pilgrimage in Houston.
As per the IEA five-year outlook, the US that became the world’s top oil producer in 2018, is now set to become the world’s biggest oil exporter over the next five years. The country’s gross crude oil exports are set to reach 4.2 million bpd by 2024, while total exports of its crude and refined products should touch 9mbpd then, the IEA said in its oil outlook, indicating Washington has a tangible chance of surpassing Russia and even Saudi Arabia as an exporter.
US oil output is set to climb to 19.6mbpd by 2024 from 15.5mbpd last year, it said. Consequent to this, the gross US crude exports would double, leading to greater competition especially in the Asian market.
The IEA’s forecast came just a few weeks after the US exported a record 3.6mbpd, emerging as a major global exporter of petroleum products including refined fuels.
Thus with oil production growth continuing to surge in the US, the IEA now expects, the “American oil exports, (and not just the production), to surpass Russia and nearly reach Saudi Arabian levels over the next five years, bringing in a greater diversity of supply.”
This ongoing revolution “will see the United States account for 70pc of the rise in global oil production and some 75pc of the expansion in LNG trade over the next five years, shaking up in the process, the international oil and gas trade flows, with profound implications for the geopolitics of energy”, Birol pointed out.
“The US has emerged as a major energy exporting country and as such, will be very influential in terms of the flows of trade of energy in the next years to come with several implications for the geopolitics of energy.”
The five-year outlook also points to a lower demand on Organisation of the Petroleum Exporting Countries (Opec) crude, as the United States and other rivals expand their output and hence exports. “The United States is increasingly leading the expansion in global oil supplies, with significant growth also seen among other non-Opec producers, including Brazil, Norway and new producer Guyana,” the IEA report underlined.
The sole point of consolation for Opec and its allies including Russia in the report was that though the global oil demand growth is set to ease as the Chinese dragon slows down, yet it would still rise by an annual average of 1.2mbpd to 2024, reaching 106.4mbpd then.
Yet, the IEA report projects the demand for Opec crude would drop in 2020 and then rise to average 31.3mbpd in 2023. The 2023 figure is up by just 600,000 bpd from this year and less than the previous forecast.
This means the major Gulf oil producers along with Russia will have to continue with some output control regimen, in the foreseeable future, so as to ensure balanced markets. “Market management by producers is likely to remain necessary for some time, given the outlook for the call on Opec crude,” the report said.
Interestingly, the report also projects considerably less impact of electric cars on the global crude consumption patterns. “The IEA continues to see no peak in oil demand, as petrochemicals and jet fuel remain the key drivers of demand growth, particularly in the United States and Asia, more than offsetting a slowdown in gasoline due to efficiency gains and electric cars,” the report added.
Thus despite some silver linings here and there, Opec’s problems are far from over. That today, is the only constant in the global crude equation - as far as the IEA five-year outlook is concerned.
Published in Dawn, March 17th, 2019