...As American crude output tops 10 million bpd
The President of the Organisation of Petroleum Exporting Countries (OPEC) and United Arab Emirates (UAE)’s Energy Minister, Suhail Al Mazrouei, has stated that the increased production of shale oil by the United States will not hamper the efforts of OPEC and non-OPEC countries to clear the glut in the oil market.
In its monthly Oil Market Report (OMR) released Monday OPEC attributed the increase in US shale oil production to steady gains in the price of crude oil since the middle of last year.
According to the cartel, the oil price gains triggered more work in exploration and production, not only in the US shale oil sector, but also in the deep US waters in the Gulf of Mexico.
By the second half of the year, OPEC said it expected total US oil production to slow down or even stall.
At more than 10 million barrels per day, the United States is now rivalling Saudi Arabia, the de facto leader of OPEC, in terms of production.
Speaking Monday in an interview in Dubai, AI Mazrouei disclosed that the oil market should re-balance this year, given robust demand and producers’ compliance with their pledges to curtail supply.
He stressed that the US shale oil won’t be a “huge distorter” for the oil market as stronger demand and compliance with oil cuts have buoyed prices.
There are concerns that the surging US shale oil production would complicate efforts by OPEC, Russia and other producers to prop up crude prices by curtailing supply.
Crude oil is rebounding from its biggest weekly decline in two years, though gains are limited due to concerns over resurgence in US shale oil production.
The US oil rig count rose last week by 26, the most in a year, to 791, Baker Hughes data showed at the weekend.
American weekly crude output topped 10 million barrels a day for the first time on record, and the US government forecasts it will balloon to 11 million later this year.
Oil producers had agreed in November 2017 to extend the self-imposed limits on production output until the end of this year, seeking to counter a glut fed partly by US shale oil drillers.
“Shale oil is coming and the expectation is that it will come stronger than in 2017, and this is something that we have to watch. But considering all factors, I don’t think it will be a huge distorter of the market,” Al Mazrouei said.
He added: “What concerns us today is the level of inventories that we need to achieve the five-year average, and I see the market going in that direction and achieving balance."
“How long it will take depends on how long the increase in shale production will take. Demand for this year is expected to be good, if not better than 2017.”
This, together with “good” economic indicators and compliance with output cuts, indicate that the crude market will balance within the year, he added.
Oil prices are currently at less than half their 2014 peak, with benchmark Brent crude futures up 0.8 per cent at $63.28 a barrel in London Monday. Brent tumbled 8.4 per cent last week, in the second consecutive weekly loss.
Mohammad Barkindo, OPEC’s secretary-general, had also said to achieve oil market stability, the cooperation between OPEC and non-OPEC member countries should be institutionalised.