- US to overtake Russia as world’s biggest producer
The Energy Minister of the United Arab Emirates and key figure in the Organisation of Petroleum Exporting Countries (OPEC), Suhail Al-Mazrouei, on Tuesday revealed that he expects the global oil market to be balanced this year, as producers continue to trim production following a 2014 market crash.
This is coming as the International Energy Agency (IEA) has predicted that the United States would overtake Russia as the world’s biggest oil producer by 2019 at the latest, as the country’s shale oil boom continues to upend global markets.
Mazrouei told the Global Financial Markets Forum in Abu Dhabi that “I am optimistic that this year, we will achieve a market balance” between supply and demand.
Oil producers from OPEC and non-OPEC countries struck a historic deal in late 2016 to cut output by 1.8 million barrels per day, following a surplus in crude supply that sent prices crashing in 2014.
Compliance to the cuts hit 133 per cent in January, which Mazrouei said exceeded the percentage required in the deal.
The compliance rate was 129 per cent in December and 122 per cent in November.
Oil prices have rebounded to around $70 a barrel as a result of the policy.
Arab News quoted Mazrouei as saying that cooperation between oil producers including Russia had reached levels that were “more than expected.”
The minister said earlier this month that OPEC aimed to forge longer-term partnership with non-OPEC producers to stabilize the market.
Mazrouei warned, however, that with the balance returning to the oil market and demand picking up, the energy sector would require hefty investment in the near future — not only by the oil-rich Gulf states, but also international oil companies.
“We need to add 15 million barrels daily by 2040 to meet demand,” he added, putting the needed investment at $10.5 trillion.
Oil dipped yesterday with Brent trading at $67.44 per barrel and US West Texas Intermediate crude at $63.79 before weekly data that is forecast to show rising US crude inventories, although investor confidence in OPEC’s ability to curb output helped stem the price slide.
But soaring US production is upending global oil markets at a time when other major producers – including the Middle East-dominated OPEC and Russia – have been withholding output to prop up prices.
In a related development, the United States will overtake Russia as the world’s biggest oil producer by 2019, International Energy Agency (IEA) Executive Director Fatih Birol has said.
“US shale growth is very strong, the pace is very strong … The US will become the No.1 oil producer sometime very soon,” Reuters quoted Birol as saying.
Birol said at an event in Tokyo the US would overtake Russia as the biggest crude oil producer “definitely next year,” if not this year.
“US shale growth is very strong, the pace is very strong … The United States will become the No.1 oil producer sometime very soon,” he reportedly said.
US crude oil output rose above 10 million barrels per day (bpd) late last year for the first time since the 1970s, overtaking top oil exporter Saudi Arabia.
The US Energy Information Administration said early this month that US output would exceed 11 million bpd by late 2018.
That would take it past top producer Russia, which pumps just below that mark.
Birol said he did not see US oil production peaking before 2020, and that he did not expect a decline in the next four to five years.
US oil is also increasingly being exported, including to the world’s biggest and fastest growing markets in Asia, eating away at OPEC and Russian market share.
Birol said production growth was not just strong in the United States.
“Canada, especially the oil sands, and Brazilian offshore projects -these are the two major (non-US) drivers,” he said.
On the demand side, Birol said the IEA expected growth of around 1.4 million bpd in 2018.
