Monday, March 18, 2019
The International Energy Agency (IEA) said March 11 the U.S. will drive oil supply growth over the next five years thanks to the remarkable strength of its shale industry, triggering a rapid transformation of world oil markets. The agency notes in its annual oil market forecast released that day that by the end of 2019 oil exports from the U.S. will overtake Russia and close in with those of Saudi Arabia, bringing greater diversity of supply While global oil demand growth is set to ease, in particular as China slows down, it still increases an annual average of 1.2 MMbbld through 2024, according to the report, Oil 2019. Still, IEA continues to see no peak in oil demand as petrochemicals and jet fuel remain the key drivers of growth, particularly in the U.S. and Asia, more than offsetting a slowdown in gasoline due to efficiency gains and electric cars.
Global oil markets are going through a period of extraordinary change, with long-lasting implications on energy security and market balances throughout the 2024 forecast period, IEA comments. The U.S. is increasingly leading the expansion in global oil supplies, with significant growth also seen among other non-OPEC producers, among them Brazil, Norway, and a new producer, Guyana.
The story of how the U.S. transformed itself into a major exporter within less than a decade is unprecedented. It is due to the ability of the U.S. shale industry to respond quickly to price signals by ramping up output. The nation accounts for 70% of the total increase in global capacity through 2024, adding a total of 4 MMbbld. This follows spectacular growth of 2.2 MMbbld in 2018.
Iraq reinforces its position as one of the world’s top producers. As the world’s third-largest source of new supply, it also drives growth within OPEC to 2024. The increase will have to compensate for steep losses from Iran and Venezuela, as well as a still-fragile situation in Libya. The implications of these developments on energy security are significant and could have lasting consequences.
“The second wave of the U.S. shale revolution is coming,” said Fatih Birol, IEA executive director. “It will see the United States account for 70% of the rise in global oil production and some 75% of the expansion in LNG trade over the next five years. This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy.”
IEA observes that in the longer term, security of supply is linked to upstream investment. Preliminary investment plans by major international oil companies indicate that upstream investment is set to rise in 2019 for the third straight year. For the first time since the 2015 downturn, investment in conventional assets could increase faster than for the shale industry.
In the downstream sector, product markets are on the eve of one of the biggest shakeups ever with the implementation of the International Maritime Organization’s new rules governing bunker fuel quality in 2020. Although the shipping and refining industries have had several years’ notice, there have been fears of shortfalls when the rules come into effect.
IEA’s updated analysis, however, shows that industry players are in a strong position to comply in the medium term. As for the first year, the situation will be tight. Prices for gasoil, a middle distillate, could rise as demand from the marine sector increases. The industry is adjusting, with the largest incremental volumes coming from the U.S., the Middle East, and China.
The agency report says the U.S. shale revolution is also altering the picture for refiners. Shale barrels are generally lighter and sweeter than the average crude slate, which means they require less complex refining processes to turn them into final products.
“These are extraordinary times for the oil industry as geopolitics become a bigger factor in the markets and the global economy is slowing down,” Birol said. “Everywhere we look, new actors are emerging and past certainties are fading. This is the case in both the upstream and the downstream sectors. And it’s particularly true for the United States, by far the stand-out champion of global supply growth.”
(SOURCE: The Weekly Propane Newsletter, March 18, 2019)
Global oil markets are going through a period of extraordinary change, with long-lasting implications on energy security and market balances throughout the 2024 forecast period, IEA comments. The U.S. is increasingly leading the expansion in global oil supplies, with significant growth also seen among other non-OPEC producers, among them Brazil, Norway, and a new producer, Guyana.
The story of how the U.S. transformed itself into a major exporter within less than a decade is unprecedented. It is due to the ability of the U.S. shale industry to respond quickly to price signals by ramping up output. The nation accounts for 70% of the total increase in global capacity through 2024, adding a total of 4 MMbbld. This follows spectacular growth of 2.2 MMbbld in 2018.
Iraq reinforces its position as one of the world’s top producers. As the world’s third-largest source of new supply, it also drives growth within OPEC to 2024. The increase will have to compensate for steep losses from Iran and Venezuela, as well as a still-fragile situation in Libya. The implications of these developments on energy security are significant and could have lasting consequences.
“The second wave of the U.S. shale revolution is coming,” said Fatih Birol, IEA executive director. “It will see the United States account for 70% of the rise in global oil production and some 75% of the expansion in LNG trade over the next five years. This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy.”
IEA observes that in the longer term, security of supply is linked to upstream investment. Preliminary investment plans by major international oil companies indicate that upstream investment is set to rise in 2019 for the third straight year. For the first time since the 2015 downturn, investment in conventional assets could increase faster than for the shale industry.
In the downstream sector, product markets are on the eve of one of the biggest shakeups ever with the implementation of the International Maritime Organization’s new rules governing bunker fuel quality in 2020. Although the shipping and refining industries have had several years’ notice, there have been fears of shortfalls when the rules come into effect.
IEA’s updated analysis, however, shows that industry players are in a strong position to comply in the medium term. As for the first year, the situation will be tight. Prices for gasoil, a middle distillate, could rise as demand from the marine sector increases. The industry is adjusting, with the largest incremental volumes coming from the U.S., the Middle East, and China.
The agency report says the U.S. shale revolution is also altering the picture for refiners. Shale barrels are generally lighter and sweeter than the average crude slate, which means they require less complex refining processes to turn them into final products.
“These are extraordinary times for the oil industry as geopolitics become a bigger factor in the markets and the global economy is slowing down,” Birol said. “Everywhere we look, new actors are emerging and past certainties are fading. This is the case in both the upstream and the downstream sectors. And it’s particularly true for the United States, by far the stand-out champion of global supply growth.”
(SOURCE: The Weekly Propane Newsletter, March 18, 2019)
