Saudi Arabia will remain top oil exporter, but ‘cannot ignore’ shale revolution, says IEA

The IEA's Fatih Birol said: ‘In the shale-revolution world, no country is an island. The established producers’ strategy in terms of cuts and limits will have to be reconsidered in light of the huge growth in shale.’ (Reuters)
Updated 05 March 2018
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Saudi Arabia will remain top oil exporter, but ‘cannot ignore’ shale revolution, says IEA

HOUSTON: Saudi Arabia will remain the “most important oil exporting country for many years to come,” but its strategy and that of the rest of the OPEC countries will have to be reconsidered in light of the revolution in the energy world as a result of the boom in US shale production.
That was the message from Fatih Birol, the executive director of the International Energy Agency (IEA) at the CERAWeek by IHS Markit meeting in Houston, Texas.
Birol, who unveiled the IEA’s global oil report at the event, said Saudi Arabia and other “established producers” had limited scope to affect global energy trends over the next five years, and would have to rethink their strategy to take account of the new energy environment.
“In the shale-revolution world, no country is an island. The established producers’ strategy in terms of cuts and limits will have to be reconsidered in light of the huge growth in shale,” he said.
Birol was asked if Saudi Arabia should try to coordinate strategy with shale producers in light of the US boom, with speculation in Houston that OPEC producers were in talks with their American rivals.
“Saudi Arabia will remain the largest and most important exporter, but is not the biggest producer, and there is an important difference. The market has its own dynamics and companies always will look to increase their financial returns. From that angle, the shale producers will continue to grow regardless of any agreement Saudi Arabia might reach with shale producers. That cannot ignore the growth coming from shale,” he said.
The IEA oil report forecast growing demand for crude over the next five years, but also predicted that US shale was on the brink of a “major second wave” that would see American producers supplying more than half of the increased global demand expected to come mainly from China and India. “America will put the stamp on global oil market developments over the next five years,” he said.
The IEA said that its bullish forecasts for shale output were conservative. “We will revise upward if the oil price goes much above $60,” Birol said.
However, Neil Atkinson, head of the IHS oil market team, said it was unlikely prices would head upward significantly in the near future. “It’s difficult to see how prices can move upward much, apart from geopolitical reasons,” he said.


Oil jumps as market tightens, more gains seen

Updated 24 September 2018
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Oil jumps as market tightens, more gains seen

  • Brent crude hit its highest since May at $80.47 per barrel
  • Commodity traders Trafigura and Mercuria said that Brent could rise to $90 per barrel by Christmas

LONDON: Oil prices rose 2 percent on Monday as US sanctions restricted Iranian crude exports, tightening global supply, with some traders forecasting a spike in crude to as much as $100 per barrel.
Brent crude hit its highest since May at $80.47 per barrel, up $1.63 or more than 2 percent, before easing back slightly to around $80.40 by 0730 GMT. US light crude was $1.18 higher at $71.96.
US commercial crude oil inventories are at their lowest since early 2015 and although US oil production is near a record high of 11 million barrels per day (bpd), subdued US drilling activity points toward a slowdown in output.
Commodity traders Trafigura and Mercuria said on Monday that Brent could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once US sanctions against Iran are fully implemented from November.
J.P. Morgan says US sanctions on Iran could lead to a loss of 1.5 million bpd, while Mercuria warned that as much as 2 million bpd could be knocked out of the market.
The Organization of the Petroleum Exporting Countries as well as top producer Russia are discussing raising output to counter falling supply from Iran, although no decision has been made public yet.
OPEC leader Saudi Arabia and its biggest oil-producer ally outside the group, Russia, on Sunday ruled out any immediate extra increase in output, effectively rebuffing a call by US President Donald Trump for action to cool the market.
“I do not influence prices,” Saudi Energy Minister Khalid Al-Falih told reporters as OPEC and non-OPEC energy ministers gathered in Algiers for a meeting that ended with no formal recommendation for any additional supply boost.
A source familiar with OPEC discussions told Reuters on Friday that OPEC and other producers have been discussing the possibility of raising output by 500,000 bpd.
“We expect that those OPEC countries with available spare capacity, led by Saudi Arabia, will increase output but not completely offset the drop in Iranian barrels,” said Edward Bell, commodity analyst at Emirates NBD bank.
JP Morgan said in its latest market outlook, published on Friday, that “a spike to $90 per barrel is likely” for oil prices in the coming months due to the Iran sanctions.
Struggling with high crude prices and a weak rupee, Indian refiners are preparing to cut back crude imports.