2018 Non-OPEC Oil Supply Forecasts Upgraded on US Output

Increased investment in US tight oil is likely to drive non-OPEC crude supply growth in 2018 and was a key force behind above-forecast output this year, OPEC said on Wednesday.

The group revised its non-OPEC supply growth estimates for next year by 0.12m bbl/day, driven by a projected 0.18m bbl/day increase in expected US oil output to 1.05m bbl/day during the period.

The recovery of the US shale oil sector also represented the bulk of non-OPEC supply growth in 2017, OPEC added. US oil supplies rose 0.61m bbl/day during 2017, with total non-OPEC supply during the year growing 0.81m bbl/day.

Global oil demand for 2017 is expected to stand at 1.53m bbl/day, above initial forecasts, as a result of strong economic growth across most of the world. OPEC estimated total international GDP growth for the year at 3.7%, up 0.5 percentage points from earlier estimates.

The projections, published in OPEC’s monthly oil report, come a fortnight after the cartel agreed to extend production cuts through 2018.

“This [US] growth is mainly due to the remarkable progress in structural changes in terms of material intensity in completion metrics, such as higher completion activity for horizontal wells,” OPEC said.

The growth of US onshore oil production has raised questions about OPEC’s status as a swing producer, and whether action by its members is sufficient to shift the global oil market in the way that it used to.

Strong demand has led to Brent crude prices rising above the $60/bbl mark, with data released this week showing a draw in US crude inventories.

“The oil market is heading smoothly toward rebalancing, lower crude oil stocks, healthy demand and geopolitical tension,” OPEC said.

However, crude futures prices declined in November on higher US crude production and a drop in monthly Chinese imports, although political tension ensured that prices did not slump too far.

OPEC’s own crude production fell 133,000 bbl month on month in November, according to secondary sources, despite a 95,800 bbl/day production increase in Nigeria.

The report comes amid a spate of incidents in the European oil and gas infrastructure. An explosion at Austria’s Baumgarten hub and a shutdown of the UK’s crucial North Forties pipeline have sent prices spiking and raised supply concerns in the middle of a cold snap across much of western Europe boosting demand.

INEOS said on Tuesday that repairs to the pipeline could take weeks rather than days, meaning that supply could continue to be constrained into the new year.