OPEC Warns U.S. Oil Boom Could Decline by Year-End
A fall would support OPEC’s action last year to defend its market share against U.S.
The prediction—if it were to materialize—would provide support for a decision last year by the Organization of the Petroleum Exporting Countries to maintain its output ceiling to defend its market share against a tidal wave of U.S. oil.
In its closely watched monthly market report, OPEC said growth in U.S. oil output was set to halve this year and “a drop in production can be expected to follow, possibly by late 2015” because of lower rig counts. The organization had originally said production of U.S. oil would start falling in 2018.
On Friday, the International Energy Agency, a Paris-based energy watchdog for industrialized countries, said U.S. oil output was surprisingly strong in February as oil companies focused on the most prolific oil plays. The IEA said U.S. growth would slow—not decline—in the second half of the year.
Global oil prices took a dive last week after the IEA report.
In its report Monday, OPEC said lower global oil prices—down nearly half from June last year—“could impact marginal barrel output from unconventional sources such as tight crude”—a term that includes oil extracted from shale formations through hydraulic fracturing. OPEC cited a sharp decline in U.S. rig counts and investment plans by oil companies. Already, U.S. oil production growth will only rise by 820,000 barrels a day this year, OPEC said, compared with 1.61 million barrels a day in 2014.
OPEC itself has had some woes of its own and its crude production declined by 140,000 barrels a day to 30.02 million barrels a day due to disruptions in Libya and Iraq.
OPEC raised its forecast for global oil demand by 50,000 barrels a day to 92.33 million barrels a day.