Published: Thu, November 16, 2017
Economy | By Melissa Porter

US WTI crude oil futures settle down sharply on the day

US WTI crude oil futures settle down sharply on the day

Worldwide benchmark Brent and U.S.

The emergence of the USA "represents a major upheaval for worldwide market dynamics", said Dr Fatih Birol, IEA executive director.

“We are now witnessing a period of expansion in US oil and gas production that matches or exceeds any historical records ever achieved by the oil and gas industry, ” said Tim Gould, head of the Energy Supply Outlook division.

American crude stockpiles climbed by 1.85 million barrels last week to 459 million barrels, and production extended gains to an all-time high 9.65 million barrels a day, the Energy Information Administration said Wednesday.

OPEC and some non-OPEC producers, including Russian Federation, have been withholding production this year to end years of oversupply.

It expects the USA to account for 80% of the increase in global oil supply to 2025, driven by increases in shale.

The Paris-based IEA cut its oil demand growth forecast by 100,000 barrels per day (bpd) for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018. But that fluctuation has made the U.S. shale industry more alert and prepared for future price hikes.

Oil demand, it says, is slowing down, but it will not be reversed before 2040, even as electric-car sales rise steeply. That could mean world oil consumption may not breach 100 million bpd next year as many had expected. "Much of the gas needs to be imported (and so transportation costs are significant) and infrastructure is often not yet in place", said the report. That "will bring a lot of dollars to US business".

United States crude oil and product stockpiles were mostly higher last week against a back drop of rising domestic production and net imports. The cartel, led by Middle East producers, will see its share of the market grow to 46 percent in 2040 from 43 percent now.

“These changes brighten the prospects for affordable, sustainable energy and require a reappraisal of approaches to energy security, ” the agency said.

The three other major findings are that solar photovoltaic (PV) is on track to be the cheapest source of new electricity in many countries; that China is switching to a new economic model and a cleaner energy mix; and that electricity is broadening its horizon, spurred by cooling, electric vehicles (EVs) and digitalization.

The oil market should be able to find a longer-term equilibirum, with the oil price in a range of $50-70 a barrel, the agency said.

As welcome as these projections are for the U.S. oil and gas industry, they should be taken with a grain of salt, as renewable energy sources like solar continue to get more affordable.

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