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Page added on November 10, 2015
Oil Supply Outside OPEC to Stagnate by 2020
OPEC’s share of the global oil market will expand from 2020 as prices recover to $80 and supply outside the group stagnates due to spending cuts, according to the International Energy Agency.
The Organization of Petroleum Exporting Countries’ share of global supply will remain steady at 41 percent until 2020 then rise to 44 percent by 2025, two percentage points higher than the IEA forecast a year ago. Production growth from countries not part of OPEC will slow over the next five years and halt by 2020.
OPEC’s decision last year to defend its market share rather than cut production to support prices has curbed growth of rival supplies like U.S. shale oil. While the resulting 40 percent slump in crude prices has “sharply” reduced the group’s revenues, the strategy will eventually prove beneficial for members that are able to increase output, the IEA said.
“Market opportunities seem to be open for countries that seek to expand their
future production,” the Paris-based adviser to 29 nations said in its annual World Energy Outlook. “With higher-cost non-OPEC producers driven (by the lower price) to give ground,” the way is clear for Iran and Iraq to increase output, it said.
Shale Stumbles
The global oil and gas industry will need to keep spending $630 billion on exploration and production each year just to maintain output at current levels as aging fields decline, the agency said. Investment will be cut by 20 percent this year and will drop further in 2016, the first two-year decline in spending since the 1980s, IEA Executive Director Fatih Birol told reporters at a briefing in London.
Cuts to industry spending will result in non-OPEC crude supply leveling off at about 55 million barrels a day before 2020. That’s 1.3 million higher than this year, less than a third of the total growth of 5 million from 2010 to 2015.
U.S. drillers have cut the number of rigs in use by an unprecedented 63 percent in the past year and daily production has fallen by 450,000 barrels from its June peak. While the nation’s shale production “stumbles” in the short term, it will resume “its upward march” once prices recover to plateau at 5 million barrels a day early next decade, the agency said. Output will gradually decline in the early 2020s as costs increase and operators exhaust the most prolific areas.
‘Serious Challenges’
By 2040, OPEC could account for almost half of global oil production, or 49.2 million barrels a day. Over-reliance on a small number of producers would trigger concerns about the security of energy supply, particularly for Asia, the IEA said.
Growth in OPEC’s market share isn’t guaranteed. Some of the countries with the largest potential to increase production over the long term –- Iran, Iraq and Venezuela –- also face “serious challenges” in attracting sufficient investment amid political instability and security concerns, the IEA said.
If global economic growth falls short of forecasts, OPEC bolsters production more than expected or U.S. shale supply proves surprisingly resilient, oil prices may remain near $50 a barrel this decade, the agency said. While the market share of Middle Eastern producers would climb to its highest in 40 years in this situation, OPEC’s revenues would be 25 percent lower as weaker prices counter increased sales volumes.
Annual global demand growth will average 900,000 barrels a day during the rest of the decade, driven by emerging economies, according to the report. That compares with an average of 1.15 million a day from 2000 to 2010, IEA data show.
Consumption growth will slow from 2020 because of rising oil prices, efforts to phase out fuel subsidies, energy efficiency policies and increased used of alternative fuels. By 2040, oil consumption in the U.S., European Union and Japan will have dropped by 10 million barrels a day, the IEA said.
20 Comments on "Oil Supply Outside OPEC to Stagnate by 2020"
makati1 on Tue, 10th Nov 2015 5:45 am
More Bloomy BS. An article about 2020 or later is just guessing. My guess are equal to or better than theirs as my income does not come from oil company ads and I appear to be better informed than their writers. It must be getting difficult to sell news these days. I hope they didn’t pay the author more than $10 for this article.
2040 is still 25 years away. That is practically infinity with the speed of events today. We can have a world war and the resultant crash to the middle ages by then, or a Worldwide Great Depression that ends the demand for oil at any price. Or even a pandemic or climate change that kills off most of the world’s population in the next 25 years.
I would be hesitant to give odds on any one of those NOT happening, or maybe all four will. Anyone expecting oil demand to keep growing and prices to rise is just kidding themselves, I think. $80+ oil is an invitation for disaster from what I see in the consuming nations financial and economic contractions. There is no indication that that slide to the bottom is going to stop before we hit the Lord and Serf levels.
Or are you speaking of Zimbabwe type dollars where $80 buys what $5 buys today? Or Maybe 2%/yr inflation? That would take $50 to $80 in 25 years. But it would still only buy what $50 buys today. LMAO
Davy on Tue, 10th Nov 2015 7:38 am
“While the nation’s shale production “stumbles” in the short term, it will resume “its upward march” once prices recover to plateau at 5 million barrels a day early next decade, the agency said. Output will gradually decline in the early 2020s as costs increase and operators exhaust the most prolific areas.”
That is about as agenda as it gets. That statement would even make Mak blush. You should always discount something that says “it will” and “once (prices recover)”.
“If global economic growth falls short of forecasts, OPEC bolsters production more than expected or U.S. shale supply proves surprisingly resilient, oil prices may remain near $50 a barrel this decade, the agency said.”
Notice how on the down side is an “if” and not like the upside that is a “it will”. What “is” now is “If the global economy growth falls short of forcast”. The reality “is” this is what matters. The rest is fluff.
shortonoil on Tue, 10th Nov 2015 8:18 am
The price of oil is not gong up; it will be going down:
http://www.thehillsgroup.org/depletion2_022.htm
There has been a 55% decline in price, and that has not created an increase in demand. Petroleum is losing its ability to power the economy. It is the strength of the economy that provides its demand. With the reality of the situation, point blank in their face, the world still can not accept that the oil age is ending. Producers can not continue to produce for long at the present price level, and the market can not pay any more for it.
The Bloombergs of the world will continue to spin their fairy tales, as the global industrial world dissolves around them. They are willing to leave the world completely unprepared for what is to come to sell one more share of stock for one more day. If selling their story of never never land extends their stay for one more day to them it was worth the effort. All they need to sell it is one more fool for one more day.
http://www.thehillsgroup.org/
JN2 on Tue, 10th Nov 2015 12:02 pm
>> There has been a 55% decline in price, and that has not created an increase in demand. <<
Really? Demand is up from 90.74 mbpd in 2013 to 95.17 in Q3 2015 (IEA). Looks like an increase in demand to me…
https://www.iea.org/oilmarketreport/omrpublic/
rockman on Tue, 10th Nov 2015 12:42 pm
JN2 – And it can take many months/years for the global economies to fully react to prices changes…increasing or decreasing. But the futures market can radically change in just minutes depending on what news hits the wires. Which is why IMHO the futures market is a very poor indicator of long term pricing dynamics.
shortonoil on Tue, 10th Nov 2015 12:48 pm
“Really? Demand is up from 90.74 mbpd in 2013 to 95.17 in Q3 2015 (IEA). Looks like an increase in demand to me…”
First the decline in price did not start in 2013, it started in June of 2014. The actual increase in demand has been less than 3%. 3% on a 55% reduction in price is not an increase in demand. It is a Going Out of Business Sale. If the price of horse shit went down 55% there would be better than a 3% increase in sales. If Walmart cut their prices by 55%, and only produced a 3% increase in sales they would be shutting their doors the next day. For all practical purposes petroleum is no longer responding to price declines in any meaningful way. We explain why at our site. Anyone with any business experience at all would understand that!
http://www.thehillsgroup.org/
Boat on Tue, 10th Nov 2015 2:12 pm
short,
Read Rocks post right above yours and learn something. Price changes take years to fully react. This is why there are revisions to guessing what the future may bring by all the experts. Lots of variables at play.
GregT on Tue, 10th Nov 2015 4:13 pm
Boat said,
“short,”
“Read Rocks post right above yours and learn something.”
You have proven time and time again that you don’t understand Short’s ETP model, the exponential function, or even how your own money works. Yet you continue to call out people here that are light years ahead of you in experience, education, and intelligence.
You really are quite the piece of work Boat.
twocats on Tue, 10th Nov 2015 4:37 pm
One aspect to Rock’s point: for instance, I’ve been seeing articles on things like auto sales reverting a bit to less focus on efficiency and this will bleed into demand long term.
What I don’t know, and what will be interesting to find out is – how much of this current 95 mbpd demand is baseline and how much is marginal? Gregor MacDonald has done great work showing a BTU transfer from East to West, about 25% coming from an increase in production, and the other 75% coming from demand destruction in Europe and US (roughly, if I’m remembering correctly, and I think the total was approximately 12 million BTU, but it’s been a couple of years).
So as production begins to fall and catches down to demand… will there be another corresponding round of extreme demand destruction in the 10’s of millions of BTUs? I doubt it. I think these demand destruction waves will become smaller and smaller.
Here’s one tiny example, a couple of years ago I lived in a pretty compact city area, close to work, with a fairly efficient car, and didn’t drive very often. I tried to imagine what price that gasoline would have to go before I would significantly change my behavior, and the answer very very high – like crazy high – like $30 a gallon. And so as marginal demand is destroyed and it is underlayered with base demand, what is the current stratification of demand vs price?
shortonoil on Tue, 10th Nov 2015 6:20 pm
“Read Rocks post right above yours and learn something. Price changes take years to fully react. This is why there are revisions to guessing what the future may bring by all the experts. Lots of variables at play.”
The price decline took 6 months. It took 12 for the industry to cut $200 billion in CapEx. That’s not years; that months. 3% in 18 months is no increase at all, China, India should have been able to have consumed more than that, they didn’t. The 3% is for gasoline, take a look at all distillates and the picture gets even worse. After the 48% decline in price between 1985 and 1986 consumption of finished products grew by almost 6% the next year.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTPUPUS1&f=A
line 26 the Total Product Supplied between 10/30/15 and 10/31/14 went down by 0.07%, or 131 thousand barrels/ day. This also includes the finished product inventory increases that have been going on for the last year. Inventories have been growing in all categories, and that did not occur in 1985 and 1986.
http://ir.eia.gov/wpsr/overview.pdf
You guys are blowing it out your annal orifice!
apneaman on Tue, 10th Nov 2015 7:27 pm
boat, be wary of “experts”. Apparently they are mostly expert at bullshitting.
CBC Doc Zone The Trouble With Experts
https://www.youtube.com/watch?v=wnwjwvBKgi4
makati1 on Tue, 10th Nov 2015 8:54 pm
Expert: A drip under pressure. LOL
BC on Wed, 11th Nov 2015 12:49 am
https://app.box.com/s/ys8ijadj4b57nb95ka0b3ilph38ga7fm
https://app.box.com/s/h0p6s4ye96k6cx7smn0r2te0giganyy1
https://app.box.com/s/xcult10g1qfq3qi9wobow4j4l6j0pu0o
shortonoil on Wed, 11th Nov 2015 8:49 am
As the entropic decay of the Petroleum Production System increases (the Second Law says it has to) it requires more energy to produce oil. That is about 2.5% per year. Most of the increase in demand we are seeing is coming from the petroleum industry itself. The end consumer is probably showing no real growth in usage. Without an increase in end user demand, the non energy goods sector of the economy can not grow. Without growth the price of oil can not increase. The price of oil is now range bound on the top, as the cost to produce it is increasing. This will result in growing stress for the industry, and all other sectors dependent upon it.
http://www.zerohedge.com/news/2015-11-11/its-bloodbath-here-biggest-casualty-canadas-recession
marmico on Wed, 11th Nov 2015 8:53 am
Of course, the downward slope of petroleum consumption to final sales is similar to a demand curve. It’s called petroleum intensity, fucktard.
In 1980, 34 quads of petroleum consumption generated $6.5 trillion of GDP (final sales). In 2015, ~36 quads generated ~$16.5 trillion.
The 1980 quad to $trillion ratio was 5.2. In 2015 the quad to $trillion ratio is 2.2. The downward slope writ large.
ghung on Wed, 11th Nov 2015 9:00 am
Marm; is that what it takes to make you feel good about yourself? Calling people “fucktard”?
GregT on Wed, 11th Nov 2015 9:14 am
@Short,
“Of course, the downward slope of petroleum consumption to final sales is similar to a demand curve.”
Everyone knows that eCONo-babble trumps the laws of physics.
What were you thinking?
Boat on Wed, 11th Nov 2015 9:27 am
short,
The price decline took 6 months. It took 12 for the industry to cut $200 billion in CapEx. That’s not years; that months.
Global demand growth is expected to slow from its five-year high of 1.8 mb/d in 2015 to 1.2 mb/d in 2016 – closer towards its long-term trend as previous price support is likely to wane.
The world economic crash, depressed oil prices. 2/3 of the drilling rigs pulled out of the fields in. Large expenditure projects being shelved. What is the result? A forecast world of demand dropping from 1.8 billion global growth to 1.2 growth. This is growth were talking here not contraction.
https://www.iea.org/oilmarketreport/omrpublic/currentreport/
Instead of cherry picking one week to another a year apart look at the general trends in a more comprehensive way. Read and study the highlight section.
What is funny is even in your post you admit growth but just not as fast as growth in 1985 -1986
So here is the wrap up. World oil consumption is up but growth is expected to slow from 1.8 to 1.2 million a day. Storage is still growing putting pressure on prices. Finished petroleum products inventories are growing also
putting pressure on prices.
If global collapse is eminent why is demand still growing.
marmico on Wed, 11th Nov 2015 9:28 am
Marm; is that what it takes to make you feel good about yourself? Calling people “fucktard”?
Yes. There is an inverse relationship between a BC chart that has been plastered all over the intertubz and its validity.
Now you were commenting on the data were you. Go back to your greenhouse and jerk off, fucktard.
GregT on Wed, 11th Nov 2015 9:15 pm
“If global collapse is eminent why is demand still growing.”
There really isn’t any point in trying to explain something to you that is clearly well beyond your level of intelligence Boat.