Non OPEC record production: US leads the pack shale boom

[ceo_energemsier + 1,818]

Non-OPEC production is growing at record speed

Oil production from non-OPEC countries is expected to grow at record speed in 2020, creating a headache for OPEC, which is scheduled to meet this week in Vienna to discuss extending oil production cuts.

 

 

Oil production from non-OPEC countries is expected to grow at record speed in 2020, creating a headache for the Organization of the Petroleum Exporting Countries (OPEC), which is scheduled to meet this week in Vienna to discuss extending oil production cuts.

 

Rystad Energy predicts that total non-OPEC production (crude oil and condensate) will grow by around 2.26 million b/d in 2020, creating a challenge for OPEC and Russia as they attempt to balance the global oil market next year.

“The record high production growth from non-OPEC tight oil and offshore puts significant pressure on OPEC’s ability to balance the oil market in 2020. Rystad Energy believes that OPEC will need to extend and deepen production cuts if they have any hope of supporting the oil price in the near-term,” said Espen Erlingsen, head of upstream research at Rystad Energy.

Looking at the year-over-year change in total non-OPEC oil production from 1960 – the year OPEC was born – towards 2020, we see that production from non-OPEC countries grew the most in 1978, growing 1.96 million b/d thanks to increases from Russia, US, UK and Mexico.

Next year, this 40-year old production growth record may be beaten. Tight oil is expected to be a key contributor to the non-OPEC oil production expansion, contributing around 1.35 million b/d of the 2.26 million b/d increase according to Rystad Energy analysts. Offshore will balloon by an impressive 1.25 million b/d, almost 0.9 million b/d of which will come from deepwater.

“In a unique turn of events, it is the offshore segment which will drive much of 2020’s non-OPEC supply growth. The record-high production growth next year comes almost exclusively from tight oil and offshore,” Erlingsen said.

 

The US tops the list of non-OPEC countries who will see the quickest production growth in 2020, driven by tight oil production. Norway and Brazil, the world’s two dominant offshore players, follow close behind.

 

Norwegian production growth will in large part be driven by Johan Sverdrup, as well as smaller projects such as Oda, Valhall West Flank, and Trestakk.

“Although a rather mature producer, Norwegian production growth may reach an all-time high next year, boosted by a bevy of young finds,” Erlingsen observed.

The same can be said of Brazil, where record high production growth is expected next year thanks to the Buzios, Lula, and Lara projects. Rystad Energy forecasted recently that Brazil’s state oil company Petrobras is set to become the world’s largest oil producer among publicly listed companies by 2030. 

[ceo_energemsier + 1,818]

Rystad Sees 3 OPEC+ Decision Scenarios

 

 

Rystad Energy outlined Tuesday that it sees three alternative OPEC+ decision scenarios; a “base case”, a “deeper cuts” scenario and a “no deal/market share war” scenario.

Under its base case, Rystad sees an extension of current production cuts to June 2020. In this scenario, the global oil market will be oversupplied to the tune of 1.2 million barrels per day (MMbpd) next year and a “significant” oil price correction is likely, according to Rystad.

In its deeper cuts scenario, Rystad says an additional production cut of 750,000 bpd, on top of the 300,000 bpd in the extension scenario, would reduce the supply overhang and ensure stable prices.

Under its no deal/market share war scenario, Rystad sees potential stock builds of 2.3 MMbpd. In this scenario, Rystad outlines that oil prices could fall below $30 per barrel.

“We have a clear message to the OPEC+ countries; a ‘roll-over’ of the current production agreement is not enough to preserve a balanced market and ensure a stable oil price environment in 2020,” Bjornar Tonhaugen, head of oil market research at Rystad Energy, said in a company statement.

“The outlook will be bleak if OPEC+ fails to agree on additional cuts,” he added.

“Despite decent cut compliance from the group as a whole and large involuntary declines in Iran and Venezuela this year, OPEC’s current crude production of about 29.7 MMbpd is far above the ‘call’ for 2020. Alas, without deeper cuts taking effect in January 2020, large global implied stock builds are on the cards,” Tonhaugen continued.

Last month, a research note from Jefferies outlined that OPEC+ seemed “increasingly likely” to retain its production targets at its next meeting.

“We previously expected loosening market conditions had raised the probability of the group cutting production further, but it seems increasingly likely it will stand pat with existing targets,” Jefferies analysts stated in the note.

“We expect that at a minimum the group will need to extend these targets beyond 1Q20 to avoid spooking the market,” the analysts added.

The 177^th meeting of the OPEC conference is scheduled to take place tomorrow in Vienna, Austria. On December 6, the seventh OPEC and non-OPEC ministerial meeting is due to take place.

 

[ceo_energemsier + 1,818]

OPEC and allies agree to deepen oil output cuts

 

 

VIENNA (Reuters) - OPEC and allies led by Russia on Thursday agreed one of the deepest output cuts this decade to support crude prices and prevent a glut but were still debating how long the curbs would last next year.

The Organization of the Petroleum Exporting Countries (OPEC) is meeting to discuss supply policy in Vienna. OPEC will then meet on Friday with Russia and other producers, a grouping known as OPEC+.

Russian Energy Minister Alexander Novak said a panel of key energy ministers including Saudi Arabia and Russia had recommended the OPEC+ group deepens existing supply curbs of 1.2 million barrels per day by another 500,000 bpd. The cut of 1.7 million bpd would amount to 1.7% of global supply.

He said cuts would last through the first quarter of 2020, a much shorter timeframe than suggested by some OPEC ministers, who have called for extending cuts until June or December 2020. OPEC could in theory decide to approve a longer timeframe than OPEC+.

"We concluded that in order to safely go through the seasonal demand period in the first quarter of 2020 it could be recommended that countries additionally cut up to 500,000 barrels per day," Novak said.

OPEC+ has agreed voluntary supply cuts since 2017 to counter booming output from the shale fields of the United States, which has become the world's biggest producer. Washington has forced an even steeper reduction in supply through sanctions on OPEC members Iran and Venezuela aimed at choking both countries' oil export revenue.

As producers meet on Thursday and Friday they will consider how to balance their supply with another year of rising output from the United States in 2020. Other non-OPEC countries such as Brazil and Norway are also expected to pump more oil.

Ministers from Saudi Arabia, Russia, Kuwait, the UAE, Algeria, Oman and Algeria had their pre-OPEC meeting on Thursday with the OPEC meeting still not started as of 1520 GMT.

 

COMPLIANCE

Saudi Arabia needs higher oil prices to support its budget revenue and the pending initial public offering (IPO) of state-owned oil giant Saudi Aramco with pricing of the IPO expected on Thursday.

OPEC's actions in the past have angered U.S. President Donald Trump, but Trump has said little about OPEC in recent months. That might change if oil and gasoline prices rise ahead of the U.S. presidential election set for November 2020.

OPEC's actions have supported oil prices at around $50-$75 per barrel over the past year. Brent crude futures on Thursday extended this week's gains to trade above $63 per barrel. [O/R]

OPEC sources have said Riyadh was pressing fellow members Iraq and Nigeria to improve their compliance with quotas, which could provide an additional reduction of up to 400,000 bpd.