Issue 133 – Shale oil boom
Introduction…OPEC said last Monday it sees a surge in oil supply driven by rising U.S. output. However, it also sees demand in 2018 to grow faster than expected.
Production growth…The cartel sees non-OPEC production growing by 1.4 million barrels per day, up 250,000 BPD from its earlier estimate. The United States accounts for more than half of the revision increase. The U.S. supply growth now expected to be 150,000 barrels per day.
Demand Growth…OPEC now expects the world’s oil demand to grow by 1.59 million barrels per day, up 60,000 BPD from last month. The total global oil consumption would be 98.6 million BPD.
OPEC sees the drivers of this demand growth as the steady rising economic activity around the world. This creates a strong demand for transportation fuels like gasoline and jet fuel. Also, contributing is the growing petrochemical industry which turns byproducts from oil and natural gas into chemicals.
Conclusion… The global economic growth is creating more demand for oil and gas consumption. If this demand growth will keep up with the supply growth is yet to be seen. However, OPEC is painting a scenario where oil profits and pricing will remain high in 2018.
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Source: Tom Christopher, “OPEC hikes its 2018 forecast for oil supply growth on a flood of US crude,” USA Today, 12 Feb 2018