The world's largest oil producers appealed to USA shale producers to join their efforts to hold global prices at their current level at a major energy conference Monday, as the boom in shale is continuing to undermine OPEC's production curbs. Likely, they won't like what they hear.
But the price rebound has also encouraged US shale companies to pump more oil, and total USA production has topped 10 million barrels a day and toppled near-half-century record in November. Best C-suite guesses from Texas are that a sustained $50 to $60 oil price could result in a fifteen million b/d mark for USA production in the 2020s, up from ten million b/d now.
US oil majors, however, cannot engage in supply restrictions to affect the price as the OPEC cartel does, and some ministers on Monday played down the idea that the growth of shale could not be handled. The resurgence in US production is the most prominent change since the group's last forecast. "It was Opec", he said at a recent industry conference in London. The local experts publish oil reports on a regular basis. The increasing risk: Prices will become more volatile. That, in turn, puts downward pressure on crude prices, disrupting Opec's plans. Studies on how digitization of mobility can eliminate oil use has led many organizations, including some large oil companies, to speculate that oil demand could peak sometime after 2030. Restraining production would cede market share to competitors. The growth in the U.S.is coming.
Nasser also stated that investments "will only come if investors are convinced that oil will be allowed to compete on a level playing field, that oil is worth so much more, and that oil is here for the foreseeable future".
All this leaves OPEC (and its partnership with Russia) in a quandary.
In a sense, Opec created its own nemesis.
The oil industry is also funding research into big-data, cloud computing and applying new technology to its operations to cut costs and boost production. All comments are subject to editorial review. The investment yielded four billion barrels of crude, condensate and NGLs globally - not since the 1930s was so little oil found.
While Calgary-based producers worry about a lack on investment in Western Canada, they are not alone. So OPEC is needed to show restraint in order to continue to balance that market.. We keep hearing that shale oil will be the savior and bring OPEC to its knees, but the actual supply data is telling a much different story.
It is in this context of confusion that the United States needs to consider the dangers of altering a suite of energy policies that are working.
For all of 2018, the EIA estimates USA crude production will average 10.7 million barrels a day. In other words, the SPR is not superfluous.
Ecuador's Perez also downplayed the impact of USA shale production on global crude markets, noting that shale fields tend to have lower total oil recovery than conventional fields. Natural gas for April delivery traded at around $2.75 in the noon hour Tuesday.
"Of course, for this to materialize, the capex by the energy companies will have to watched and this capex can also be the growth driver for the USA economy in the years to come, even if prices remain at the current levels", he added. For that they will need more pipelines.