Booming oil production from Russia will lead the growth, predicts the International Energy Agency.
The International Energy Agency increased its estimate of oil production from countries outside OPEC next year, led by booming Russian output.
Supply growth from nations outside the Organization of Petroleum Exporting Countries will be “just shy” of 500,000 barrels a day, an increase of 110,000 barrels a day from the agency’s forecast last month, it said Thursday. Russian production is likely to grow by 190,000 barrels a day, building on a 230,000-barrel increase in 2016.
Swelling output from non-OPEC countries including Russia, Brazil and Kazakhstan presents a challenge for the 14-member exporters’ group, which meets at the end of November to hammer out the details of a production cut to buoy prices. While Russia has said it will consider joining an OPEC agreement, its own output has climbed to a post-Soviet record.
Brazil is set to increase production by 280,000 barrels a day next year, while Canadian output will rise by 225,000 barrels and Kazakh supply by 160,000 barrels, the Paris-based IEA forecast in its monthly report.
While non-OPEC production is likely to drop by 900,000 barrels a day this year, it rose by almost 500,000 a day last month as new fields started, according to the IEA. Maintenance and unscheduled shutdowns, especially in the North Sea, had curbed production in September. Kazakhstan’s giant Kashagan field boosted output in October after coming online the previous month, and oil-loading schedules suggest North Sea production also rebounded.
OPEC, led by Saudi Arabia, decided in November 2014 against curtailing production to support oil prices and instead pump at capacity to increase market share. This drove crude to a 12-year low in January this year and pushed high-cost U.S. production down. Following more than two years of low prices, OPEC reversed its policy in September, saying it would cut production for the first time in eight years.
The consequent rally in prices brought back some U.S. drilling. In October, 14 out of a total 25 oil rigs returning to service were added in the Permian shale basin, where production rates are beating expectations, the IEA said. Output in the Bakken and Eagle Ford shales isn’t as strong, and the IEA sees U.S. crude supply declining “modestly” in 2017.
Total U.S. oil and natural-gas liquids production will shrink by 465,000 barrels a day this year to 12.5 million barrels, and stay around this level in 2017, the agency forecasts.
By Rakteem Katakey