Shale growth to see US oil exports overtake Russia’s, says IEA

The United States is increasingly leading the expansion in global oil supplies, the International Energy Agency said in its five-year outlook. (Reuters)
Updated 11 March 2019

Shale growth to see US oil exports overtake Russia’s, says IEA

  • ‘By the end of the forecast (2024), oil exports from the United States will overtake Russia and close in on Saudi Arabia’
  • Global oil demand growth is set to ease as China slows

HOUSTON: The US will soon be challenging to be the biggest oil exporter in the world thanks to the “remarkable strength” of its shale industry, according to the International Energy Agency’s (IEA) latest five-year forecast.

By the end of the 2024, oil exports from the US will overtake Russia and “close in” on Saudi Arabia, the IEA said.

Fatih Birol, the IEA’s executive director, said the US would drive global oil supply growth, triggering a rapid transformation of world oil markets, adding that he could not foresee a peak in oil demand over the period, despite an “easing” of demand.

“The second wave of the US shale revolution is coming,” Birol said, unveiling the “Oil 2019” report at the CERAWeek by IHS Market forum in Houston, Texas. 

“It will see the US account for 70 percent of the rise in global oil production and some 75 percent of the expansion in liquified natural gas (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,” he added.

The US is currently in third position among the world’s oil exporters, behind Russia and Saudi Arabia, the biggest. When the US closes in on the Kingdom, it will bring “greater diversity of supply,” the IEA report said.

“While global oil demand growth is set to ease, in particular as China slows down, it still increases at an annual average of 1.2 million barrels per day to 2024,” according to the “Oil 2019” report.

“Still, the IEA continues to see no peak in oil demand, as petrochemicals and jet fuel remain the key drivers of growth, particularly in the US 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,” the report added, with long-lasting implications on energy security and market balances throughout the forecast period. Outside the US, there is also “significant growth” seen among other non-OPEC producers, including Brazil, Norway and new producer Guyana.

In Saudi Arabia, the IEA reported that the energy industry had started to replace crude oil and gasoil-fired generation by natural gas, and made investments to increase its fuel-oil fired capacity. Of the 11.1 gigawatts of fuel-oil fired capacity under construction around the world, some 8.5 are in Saudi Arabia, the IEA said. 

Iraq was also identified by the IEA as the world’s third-largest sources of new supply, driving growth within OPEC to 2024. That increase could compensate for steep losses from Iran and Venezuela, as well as a still-fragile situation in Libya.

Birol said: “These are extraordinary times for the oil industry as geopolitics become a bigger factor in the markets and the global economy is slowing down. Everywhere we look, new actors are emerging and past certainties are fading. This is the case in both the upstream and the downstream sector. And it’s particularly true for the USA, by far the stand-out champion of global supply growth.” 

“The story of how the United States transformed itself into a major exporter within less than a decade is unprecedented,” the IEA report said. “It is due to the ability of the US shale industry to respond quickly to price signals by ramping up production. The United States accounts for 70 percent of the total increase in global capacity to 2024, adding a total of 4 million barrels per day (mbd). This follows spectacular growth of 2.2 mbd in 2018,” the report added.

For the third year running, investment in upstream activities is set to rise, according to early reports from key oil and gas companies, and for the first time since the oil price collapsed in 2014-5, investment in conventional oil assets rose faster than shale.

Crude futures steady after fall on US oil products stocks gain

Updated 18 July 2019

Crude futures steady after fall on US oil products stocks gain

  • Oil prices have fallen this week as worries over a Middle East conflict have eased
  • US crude inventories fell 3.1 million barrels, the US Energy Information Administration said

TOKYO: Oil prices steadied on Thursday after falling in the previous session when official data showed US stockpiles of products like gasoline rose sharply last week, suggesting weak demand during the peak driving season.
Brent crude futures were up 13 cents, or 0.2 percent, at $63.80 a barrel by 0237 GMT. They fell 1.1 percent on Wednesday.
US West Texas Intermediate crude futures were down 1 cent at $56.77. The US benchmark dropped 1.5 percent in the previous session.
Oil prices have fallen this week as worries over a Middle East conflict have eased, oil production in the Gulf of Mexico has resumed after a storm and worries have emerged over Chinese economic growth. The “easing of tensions between the US and Iran, mixed Chinese growth data and storm-hit operations getting back online are all pressuring oil prices downward,” said Alfonso Esparza senior market analyst at OANDA.
Japan’s exports fell for a seventh straight month in June, with shipments to China falling more than 10 percent, while Japanese manufacturers’ business confidence fell to a three-year low.
On the oil supply front, data on Wednesday from the US Energy Information Administration showed a larger-than-expected drawdown in crude stockpiles last week, but traders focused on large builds in refined product inventories dragging prices down.
US crude inventories fell 3.1 million barrels, the EIA said, more than analysts’ forecasts for a decrease of 2.7 million barrels.
However, gasoline stocks rose 3.6 million barrels, compared with analysts’ expectations in a Reuters poll for a 925,000-barrel drop. Distillate stockpiles grew by 5.7 million barrels, much more than expectations for a 613,000-barrel increase, the EIA data showed.
“Gasoline consumption is painfully weak given US consumers are in peak driving season,” said Stephen Innes, managing partner at Vanguard Markets.
Crude production was disrupted last week by Storm Barry, which came ashore on Saturday in central Louisiana as a Category 1 hurricane, the first major storm to hit the US Gulf of Mexico this season.
More than half of daily crude production in the Gulf of Mexico remained offline by Tuesday, as most oil companies were re-staffing facilities to resume production.
The market shrugged of another incident involving a tanker in the Middle East amid tensions between the United States and Iran.
US officials say they are unsure whether an oil tanker towed into Iranian waters was seized by Iran or rescued after facing mechanical faults as Tehran asserts, creating a mystery at a time of high tension in the Middle East.