LONDON. – The United States will lead the world in oil production increases by 2021 in spite of the country taking the taking the “biggest hit for now,” the International Energy Agency (IEA) said yesterday.
In its annual medium-term oil market report, the IEA said that while US light, tight oil (LTO) output is “falling steeply for now” amid a low price environment, the market will begin rebalancing in 2017 and, soon after that, the US oil industry could see a robust increase in oil production.
Another country set to ramp up production is Iran, whose supply has come back into the market since international sanctions on the country were removed recently.
By 2021, the IEA said, “the US and Iran are seen leading production gains among non-OPEC and OPEC countries respectively.”
The IEA’s report pointed to the risk of an oil price spike in the later part of the outlook period (2017 to 2021) “arising from insufficient investment” as many oil producers around the world seek to mitigate low oil prices by cutting costs and closing rigs.
Oil prices plunged from a high of around $114 a barrel in June 2014 and are currently at around $33 for benchmark Brent crude and $30 for US West Texas Intermediate (WTI).
An imbalance in supply and demand, brimming crude stockpiles and record output from OPEC producers – the 12-member group which chose not to cut production in order to maintain market share and pressure rivals – has been blamed for the decline in prices.
Non-OPEC producers, such as those in the US, have struggled to break even with the lower oil price and have cut costs drastically, lowering US oil output.
Giving oil markets a sign of hope, the IEA believed that a rebalancing of supply and demand was coming.
It forecast that 4,1 million barrels a day (mb/d) would be added to global oil supply between 2015 and 2021, down sharply from the total growth of 11 mb/d in the period 2009-2015.
Global oil demand, in the meantime, would grow and reach 101.6 mb/d by 2021.
The US remains the largest contributor to supply growth during the forecast period (2017 to 2021), accounting for more than two-thirds of the net non-OPEC increase while Middle Eastern producer Iran would lead OPEC oil output gains, the IEA predicted. – CNBC