US crude production is on course to overtake Saudi Arabia and rival Russia, the International Energy Agency said, as it revised higher its 2018 growth forecast and stressed that “explosive” expansion in shale was offsetting Opec-led supply cuts.
In its closely watched monthly oil market report published on Friday, the IEA said production growth was returning “to the heady days of 2013-2015”, even as the Paris-based body said global supply and demand would broadly find balance this year.
The latest body to raise US estimates, following the US energy department’s statistics arm and Opec’s own research unit, the IEA said: “This year promises to be a record-setting one for the US.”
US growth of nearly 1.4m barrels a day — to a record 10.4m b/d — will help propel non-Opec supply by 1.7m barrels a day in 2018. Total output from outside the cartel is forecast at 59.8m b/d.
Big producer nations have feared a price rebound in recent weeks — to a 2014 high of about $70 a barrel — could spur a flood of new supply from shale companies, undermining efforts by global producers to curb output.
OPEC countries and allies outside the cartel such as Russia agreed late last year to extend a supply cut deal for the whole of 2018 as they sought to further reduce excess stockpiles and bolster prices.
A sharp decline in Venezuelan output took its production to half the level inherited by President Hugo Chávez in 1999 at about 1.6m b/d. It helped curb Opec production to 32.2m b/d last month.
“The historically high performance rate for the producer pact, however, was met with an equally remarkable increase in US production, which offset roughly 60 per cent of the realised cuts,” the IEA said.
Reuters news agency reports that US companies have profited from cost cuts through the recent industry downturn, and intensified drilling activity and efficiency measures.
Even so, the IEA said that if Opec and Russia maintained their compliance, then supply and demand should reach a balance for the year as a whole “with the first half in a modest surplus and the second half in a modest deficit”.
Global oil supply in December fell 405,000 b/d to 97.7m b/d.
Meanwhile, the IEA maintained its demand oil growth estimate for 2018 at 1.3m b/d, with total consumption expected at 99.1m b/d.
The IEA added that whether the recent price rally — Brent crude has risen as much as 10 per cent since Opec and allies agreed the production cut extension — could hold remained to be seen.
“Such are the geopolitical uncertainties and the ever-dynamic prospects for US shale that we should expect a volatile year,” said the IEA.
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