Oil output will exceed demand by 2018
The IEA forecasts an implied shortfall in supply for this year
17 June, 2017
Growth in oil supply next year is expected to outpace an anticipated pick-up in demand that will push global consumption above 100 million barrels per day (bpd) for the first time, the International Energy Agency said on 14 June. A day after OPEC complained that increased output in the US was slowing efforts to rebalance supply and demand in the oil market, the IEA also suggested that the dynamism of US producers could prove a headache for exporters.
The Paris-based IEA said production outside the Organization of the Petroleum Exporting Countries would grow twice as quickly in 2018 as it will do this year, when OPEC and 11 partner nations have restrained output.
Originally, OPEC members had agreed to cut production for six months beginning from the start of the year in a bid to reduce the glut of oil supplies on the shore up prices. Non-cartel producers led by Russia partially matched the cuts. The measures helped stabilise oil prices at the beginning of the year, with the international benchmark Brent crude sticking above $50 per barrel. And at a meeting at the end of May, both OPEC and non-OPEC countries decided to roll over the output cuts for a further nine months. Compared to May 2016, OPEC crude production was down by 65,000 bpd, the IEA said. Non-OPEC output rose by 295,000 bpd month-on-month in May to 57.8 million bpd, 1.25 million bpd higher than a year earlier.
Nevertheless, dynamic growth in output in the US, particularly by shale producers, seems to be slowing down the rebalancing process. American producers have benefitted from the OPEC and non-OPEC efforts to push prices higher. Shale producers, in particular, can react quickly to market developments, because they are less capital intensive than other ventures. And they have racked up production as prices rise.
The IEA forecast an increase in non-OPEC output of 1.5 million bpd to 59.7 million bpd in 2018, with US output to reach more than 14.1 million bpd. It did not provide a forecast for OPEC output next year, but calculated that it rose to 32.08 million bpd in May, taking the overall global supply to 96.69 million bpd last month. At the same time, overall global demand is expected to pick up by 1.4 million bpd to 99.3 million bpd next year, the IEA predicted.