Organisation of the Petroleum Exporting Countries (OPEC) has published World Oil Outlook 2017 which highlights the significant overhaul of its expectations for North American shale, projecting strong supply growth through the early 2020s.
Published recently, the latest revision represents an acknowledgment from the cartel that it has failed to kill off US shale by flooding the market.
In the 2016 version of WOO, OPEC predicted that North American shale would decline from 4.9 million barrels per day (mb/d) in 2015 to just 4.1 mb/d in 2017 – a contraction due to the supply glut – before rebounding a bit to 4.8 mb/d in 2021. Low prices would have successfully halted shale in its tracks, ending one of the most dramatic growth stories the world of oil has ever seen.
A year later, OPEC is conceding that a different reality could be playing out. The 2017 WOO predicts North American shale output rises from 5.1 mb/d in 2017 to a massive 7.5 mb/d by 2021 and 8.7 mb/d in 2025.
The 2021 figure is a whopping 56 per cent higher than last year’s forecast.
It is hard to overstate the change in assumptions; it’s a swing of nearly 3 mb/d by 2021, and that considerable change entirely alters how the cartel is approaching the oil market. The notion that US shale won’t be killed off with low prices likely underpinned the group’s thinking when it agreed to limit production last year. That, of course, could be read in another way: OPEC’s production cuts have paved the way for a stronger rebound from US shale.
Overall, it appears that OPEC is now much more convinced than last year that it would have to battle US shale for the foreseeable future.
OPEC publishes World Oil Outlook (WOO) every year in November as a way to highlight the understanding of the many possible future challenges and opportunities that lie ahead for the oil industry.