Non-OPEC oil supply to fall further, faster

NEW YORK/LONDON (Reuters) – A plunge in oilfield spending means non-OPEC oil output could soon fall, raising prices and potentially derailing any global economic recovery.

A growing number of forecasts predicting a fall reflect a major drop in oil drilling because of lower crude prices and tighter credit, and defy an earlier market consensus that non-OPEC output would rise through the economic downturn.

Global oilfield spending will probably fall 30 percent this year, cutting non-OPEC supply by 1.7 million barrels per day (bpd) by the end of 2010, and pushing oil prices up another 60 percent, Sanford Bernstein forecast.

Barclays Capital saw a potential drop of 1.5 million bpd, or 3 percent of non-OPEC supply, and a 70 percent price rise from current levels to $85/bbl in 2010. Deutsche Bank saw a 280,000 bpd decline this year.

Some of these analysts were among the most bullish on oil prices, but they expected a new reality of falling oil output will soon be recognized more widely.

Reuters