Published: Tue, March 06, 2018
Economy | By Melissa Porter

USA oil expected to meet most of world's growth in demand

Oil prices pulled back from session highs after the International Energy Agency on Monday upwardly revised USA oil output growth, saying the country would be producing a total of almost 17 million barrels per day (bpd) in 2023.

The surge in production highlights the reasons behind a palpable sense of optimism at the event. The OPEC Secretary General Mohammed Barkindo and other representatives of the organization are expected to hold dinner with U.S. shale companies on Monday.

"Demand has not been this solid and positive in a long while, probably since the last global financial crisis", he said. The agreement began in January 2017 and runs through the end of this year.

The IEA projects that China and India are both on pace to overtake the United States as the world's largest import markets over the next five years. Trump claimed that it was a move to "protect United States industry".

USA crude rose 2% to $62.48 a barrel Monday.

The energy group forecasts that the US will supply enough oil to meet 80 percent of the growing demand over the next three years, and Canada, Brazil and Norway will meet the rest.

"Upstream investment shows little sign of recovering from its plunge in 2015-2016, which raises concerns about whether adequate supply will be available to offset natural field declines and meet robust demand growth after 2020,"the IEA said".

As a result, Canada will actually be the third largest source of non-OPEC oil supply growth in the next five years after the US and Brazil.

The IEA says rail shipments are expected to return to around the 170,000-barrel-a-day level in 2020 assuming Enbridge Inc. replaces its Line 3 pipeline and adds capacity elsewhere on its Mainline pipeline system.

Venezuela's oil production is running 1.5 million barrels per day (bpd) short of its historic output but it is something that the country must address itself, Ecuador oil minister Carlos Perez said on Monday.

"The light, tight oil in the second round (of the USA supply growth story) will probably be exported in order to make room for these barrels", Bosoni said of Canadian oil supply. Still, Canadian producers should be able to increase shipments to USA refineries, assuming completion of new pipeline projects like TransCanada Corp.'s Keystone XL and Enbridge Inc.'s Line 3.

But the report finds that despite falling costs, additional investment will be needed to spur supply growth after 2020. "If sufficient capacity is not built, the increase in production we foresee could be at risk, with serious implications for global markets".

Brent futures gained $1.17, or 1.8 percent, to settle at $65.54 a barrel, while U.S. West Texas Intermediate crude futures gained $1.32, or 2.2 percent, to settle at $62.57.

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