Oil up on ongoing OPEC cuts, but rising US output weighs

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Updated 21 November 2017
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Oil up on ongoing OPEC cuts, but rising US output weighs

SINGAPORE: Oil prices rose on Tuesday, supported by expectations of an extended OPEC-led production cut, although rising output in the United States capped gains.
Brent crude futures were at $62.51 per barrel at 0807 GMT, 29 cents, or 0.5 percent above their last close.
US West Texas Intermediate crude was at $56.60 a barrel, up 18 cents, or 0.3 percent.
Traders said markets were generally supported by ongoing production cuts led by the Organization of the Petroleum Exporting Countries.
OPEC, together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year in a bid to end a global supply overhang and buoy prices.
The deal to curb output is due to expire in March 2018, but OPEC will meet on Nov. 30 to discuss the outlook for the policy.
OPEC is expected to agree to extend cuts as storage levels remain high despite recent drawdowns, although there are doubts about the willingness of some participants to continue to restrict their production.
“If the OPEC/non-OPEC cuts continue, the stocks surplus will reduce to just some 50 million barrels above the five-year average in Q3 2018 (down from 140 million barrels above that average now) and prices will hit $65-70 per barrel,” energy consultancy FGE said.
The biggest headache for OPEC has been rising US drilling activity, led by shale oil producers.
Energy consultancy Westwood Global Energy Group said US output would climb even faster than implied by the rising rig count, which has jumped from 316 rigs in mid-2016 to 738 last week, as producers get more productive per well.
“Westwood Global Energy forecasts an 18 percent increase in active rigs in 2018, but more rapid demand growth in certain service areas as operators focus on efficiency and delivering more for less,” the consultancy said.
For 2018, FGE warned potential supply disruptions during an already tighter market could trigger oil price spikes. But it said the market could slump again toward 2019 as US output continues to soar and OPEC and its allies at some point will stop withholding output.
“We see another big rush with (US) production growth of some 1-1.5 million bpd in 2018 and 2019,” FGE said. It added that OPEC also “has some 1.5 million bpd of spare capacity (while) Russia and Kazakhstan could also add another 500,000 bpd.”
Reflecting rising US oil exports to Asia, US commodity exchange CME Group said it will list a new futures contract that prices the spread between US WTI futures and Middle East benchmark Dubai, starting Dec. 18.


Global oil demand under threat from cleaner fuel

Updated 14 November 2018
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Global oil demand under threat from cleaner fuel

  • Oil demand is not expected to peak before 2040, the Paris-based IEA said in its 2018 World Energy Outlook
  • The IEA’s central scenario is for demand to grow by about 1 million bpd on average every year to 2025

LONDON: Electric vehicles and more efficient fuel technology will cut transportation demand for oil by 2040 more than previously expected, but the world may still face a supply crunch without enough investment in new production, the International Energy Agency (IEA) said on Tuesday.
Oil demand is not expected to peak before 2040, the Paris-based IEA said in its 2018 World Energy Outlook. The IEA’s central scenario is for demand to grow by about 1 million barrels per day (bpd) on average every year to 2025, before settling at a steadier rate of 250,000 bpd to 2040 when it will peak at 106.3 million bpd.
“In the New Policies Scenario, demand in 2040 has been revised up by more than 1 million bpd compared with last year’s outlook, largely because of faster near-term growth and changes to fuel efficiency policies in the United States,” the agency said.
The IEA believes there will be about 300 million electric vehicles on the road by 2040, no change on its estimate a year ago. But it now expects those vehicles will cut
demand by 3.3 million bpd, up from a previous estimated loss of 2.5 million bpd in its last World Energy Outlook.
“Efficiency measures are even more important to stem oil demand growth: Improvements in the efficiency of the non-electric car fleet avoid over 9 million bpd of oil demand in 2040,” the IEA said.
Oil demand for road transport is expected to reach 44.9 million bpd by 2040, up from 41.2 million bpd in 2017, while industrial and petrochemical demand is forecast to reach 23.3 million bpd by 2040, from 17.8 million bpd in 2017.
All global oil demand growth will stem from developing economies, led by China and India, while demand in advanced economies is expected to drop by more than 400,000 bpd on average each year to 2040, the IEA said.
The IEA, which advises Western governments on energy policy, maintained its forecast for the global car fleet to nearly double by 2040 from today, growing by 80 percent to 2 billion.
On the supply side, the US, already the world’s biggest producer, will dominate output growth to 2025, with an increase of 5.2 million bpd, from current levels of about 11.6 million bpd. From that point onwards, the IEA expects US oil production to decline and the market share of the Organization of the Petroleum Exporting Countries (OPEC) to climb to 45 percent by 2040, from closer to 30 percent today.
New sources of supply will be needed whether or not demand peaks, the agency said.
“The analysis shows oil consumption growing in coming decades, due to rising petrochemicals, trucking and aviation demand. But meeting this growth in the near term means that approvals of conventional oil projects need to double from their
current low levels,” IEA director Fatih Birol said.
“Without such a pick-up in investment, US shale production, which has already been expanding at record pace, would have to add more than 10 million bpd from today to 2025, the equivalent of adding another Russia to global supply in seven years, which would be a historically unprecedented feat.”