OPEC predicts strong US oil shale and Bloomberg sees temporary oil price increases

North American oil shale output will soar to 7.5 million barrels a day in 2021 according to OPECs World Oil Outlook report on Tuesday. This forecast is 56 percent higher than OPEC forecast a year ago.

Bloomberg sees a lag between OPEC oil cuts and US Shale production increases which allows oil prices to increase if there is strong oil demand. Currently there is strong oil demand. Oil Prices could increase for 2-3 years if OPEC maintains supply discipline.

Shale oil production

North American shale production for 2017 is now seen at 5.1 million barrels a day, up by almost a quarter from last year’s World Oil Outlook report.

In Jan. 1,OPEC targeted output cuts of about 1.8 million barrels a day in a bid to reduce global stockpiles. Brent crude has rebounded more than 10 percent this year, trading at more than $62 a barrel in London.

OPEC expects shale oil production to peak after 2025 and decline from about 2030. OPEC will then be required to increase its own output from about 33 million barrels a day in 2025 to 41.4 million in 2040, according to the report.

India and China are the two largest contributors to future energy demand

Within the grouping of Developing countries, India and China are the two nations with the largest additional energy demand over the forecast period, both in the range of 22–23 mboe/d. It should be noted, however, that for the first time recent projections see India as the single largest contributor to future energy demand, followed by China and other countries. However, this change in the leading position is primarily the result of the downward revisions made for China, compared to the Reference Case, rather than a more positive outlook for India.

Morgan Stanley has raised its forecast for oil prices through 2020, saying the world is hungry for more U.S. shale crude at a time when it’s uncertain American drillers can deliver it.

The bank now sees international benchmark Brent crude fetching $62 a barrel in the final quarter of the year, up from an earlier estimate of $55. U.S. West Texas Intermediate crude is poised to average $56 for the quarter, up from Morgan Stanley’s prior $48 call.

By the second quarter of 2018, Morgan Stanley forecasts Brent will average $63 and WTI will trade at $58 a barrel.

To balance the market, U.S. shale drillers will have to grow production from about 5.9 million barrels a day this year to 7 million barrels a day in 2018, more than previously thought, Morgan Stanley analysts conclude. That would require drillers to start standing up 8 to 10 new rigs each month, but the analysts are uncertain that will happen.

10 thoughts on “OPEC predicts strong US oil shale and Bloomberg sees temporary oil price increases”

  1. Ok not zero but close to it 0.6% electricity generated by burning oil.
    •Natural gas = 33.8%
    •Coal = 30.4%
    •Nuclear = 19.7%
    •Renewables (total) = 14.9%
    •Hydropower = 6.5%
    •Wind = 5.6%
    •Biomass = 1.5%

    •Solar = 0.9%
    •Geothermal = 0.4%

    •Petroleum = 0.6%
    •Other gases = 0.3%
    •Other nonrenewable sources = 0.3%
    •Pumped storage hydroelectricity = -0.2%

  2. “Electricity is generated mostly by burning oil in power plant.” That is false. Electricity is generated mostly by coal, gas, nuclear and wind and solar. The farther into the future the less coal and gas and the more solar and wind.

  3. OPEC prefers not to think about exponential growth in hybrid and electric vechiles. They will never get a chance to increase production because after 2025 the oil demend growth will stop and after 2030 oil demend will start to decrease. OIL prices will be going into a downward spiral after 2022-25.

  4. So did they anywhere in this projection factor in the exponential growth in hybrid and electric vechiles.

    • That probably won’t have much of an effect until at least 2020. Some countries, like the Netherlands and Norway, have a significant EV population, but in the U.S. for example it’s still less than 1% of the total new car market, then factor in all of those 10-20 year old cars still on the road. (For pure EV’s, the hybrids have a bigger market share, but they still consume oil, just at maybe 2/3 the rate of a standard vehicle).

      Global oil consumption is still rising at a pretty constant rate, the biggest factor is an economic recession. like 2008-2009.

    • EV needs electricity. Electricity is generated mostly by burning oil in power plant. Oil demand will be the same whether more EV on the road or not.

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