Published: Fri, March 09, 2018
Culture&Arts | By Laurence Reese

Global oil players flock to Houston as OPEC, US shale tensions ease

Global oil players flock to Houston as OPEC, US shale tensions ease

As U.S. production slows, demand is forecast to keep rising at a strong pace, even with continued penetration of alternative fuel vehicles.

Economic growth in Asia and a resurgent USA petrochemicals industry should lead to a 6.9 million b/d increase in oil demand by 2023 to 104.7 million b/d, according to the IEA.

The United States is well positioned to supply individual USA refiners with heavy crude from the Strategic Petroleum Reserve (SPR), should it find that new sanctions or internal strife means those refiners have to abandon Venezuelan heavy oil imports.

Kuwait especially is likely to argue that will be necessary to keep oil prices from going too high since it is keenly aware that the high prices of the early 2010s were exactly what stimulated the very US shale oil investment and energy efficiency technologies that are plaguing the long run outlook for OPEC oil today.

Over the same period, global consumption is expected to rise by just 1.7 million bpd, ensuring the United States captures all of the demand increase this year.

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Barkindo plans to meet his shale frenemies again for dinner during CERAWeek, which beings Monday and gathers thousands of oil executives, traders, bankers and investors in Houston.

OPEC Secretary General Mohammad Barkindo and other OPEC officials are expected to hold a dinner on Monday with US shale firms on the sidelines of the conference.

The IEA's consumption forecast, which is based on GDP projections from the International Monetary Fund, assumes global economic growth will remain steady at around 3.7 percent per year through 2023.

Tanker rates from the United States to Asia have also been rising recently, with the cost of shipping a tonne of oil from Houston to China TC-HOU-DLC assessed by Thomson Reuters at $29.01 on March 2, up from $18.44 at the start of February and $16.79 in late September a year ago.

Opec has been struggling with United States shale for nearly a decade now. "Unless there is a change to the fundamentals, the effective global spare capacity cushion will fall to only 2.2% of demand by 2023, the lowest number since 2007".

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USA crude oil production has already surpassed that of top exporter Saudi Arabia to 10.28 million bpd.

"Despite talk of capital discipline and increased focus on returns rather than growth, U.S. producers regrouped quickly when oil prices stabilized and began to rise", said the IEA.

The sustained rise in demand and the eventual decline in shale growth will coincide with limited global upstream investment.

On the demand side, any long-term forecast must take into account the macroeconomic cycle and possibility of a slowdown in the United States, China or the world economy at some point in the next five years.

OPEC policy is cyclical, so at some point the focus will revert to market share, when the loss of customers becomes too painful. While 2017 remained flat, Birol said that 2018 is on track for a mere 6% increase, far lower than investment levels before the 2014 oil-price crash.

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