Text size:

  • Small
  • Normal
  • Large
Supply from outside Opec will increase by 1.14m barrels per day in 2014, surpassing non-Opec supply growth of just under 1m bpd this year. Above, an offshore oil pump in Veneuzela. Jorge Silva / Reuters
Supply from outside Opec will increase by 1.14m barrels per day in 2014, surpassing non-Opec supply growth of just under 1m bpd this year. Above, an offshore oil pump in Veneuzela. Jorge Silva / Reuters

Opec report concedes threat from US shale boom

Opec was forced to concede yesterday that the North American shale boom is challenging its position in the market.

Opec conceded yesterday that the North American shale boom is challenging its position in the market. It comes just weeks after its members downplayed the significance of rising shale oil production.

Driven by a revived global economy, demand for crude is set to increase next year. But the additional demand will be met by non-Opec producers, the organisation said in its monthly oil market report, released yesterday.

According to the report, supply from outside Opec will increase by 1.1 million barrels per day (bpd) next year, surpassing non-Opec supply growth of just under 1 million bpd this year.

"The strong growth trend seen in 2013 is expected to continue in 2014," Opec said.

This year's increase in demand of 800,000 bpd will rise to 1.1 million bpd next year, raising average global demand to 90.7 million bpd. The increase in demand of 300,000 bpd equals the decline on the call on Opec next year, meaning that additional demand is essentially absorbed by non-Opec production.

"Based on the initial 2014 forecasts for world oil demand and non-Opec supply demand for Opec crude next year is projected to average 29.6 million bpd, representing a decline of [300,000] bpd," said the report.

According to the report, the bulk of additional non-Opec oil will be pumped in the Americas, where 700,000 bpd will be added to supply.

The increase is largely due to the increase of shale oil production in North America, made possible by new extraction techniques that have already revolutionised the US natural gas sector.

Hydraulic fracturing, or fracking, allows producers to extract oil and gas from deep-lying shale rock formations, dramatically increasing reserves. The shale revolution has led the International Energy Agency to predict that US and Canadian supply will grow by nearly 4 million bpd in the five years to 2018, almost two thirds of non-Opec supply growth.

"North America has set off a supply shock that is sending ripples throughout the world," said Maria van der Hoeven, the IEA's executive director.

But until now, Opec has been dismissive of the effect that new sources of oil will have on its position in the market.

"This is not the first time new sources of oil are discovered - don't forget history," said Ali Al Naimi, Saudi Arabia's oil minister, during the last Opec meeting, held last month. "There was oil from the North Sea and Brazil, so why is there so much talk about shale oil now?"

Added Abdalla El Badri, Opec's secretary general: "Opec will be around after shale oil finishes."

Yesterday's report suggests that shale oil is already altering the dynamics of the market.

But analysts are sceptical whether assumptions on non-Opec supply growth outside North America are realistic.

"Their expectations are largely based on a fairly optimistic assumption of non-Opec supply growth," said Amrita Sen, the chief oil analyst at Energy Aspects. "Given the reality in the past few years and even this year, where downgrades have been made to non-Opec supplies excluding the US, we wouldn't expect a significant change to the trend next year either."

Opec sounded a cautionary tone over the scale of demand revival next year, which according to its own forecasts will rebound at the strongest pace since 2010.

"The world oil demand estimate for 2014 is subject to uncertainties depending on the pace of recovery in economic growth in the US, the euro zone and China," it said in the report.

Opec cut production last month by about 300,000 bpd, a decline due mostly to disruption to output in Libya.

The UAE increased production slightly by 20,000 bpd to 2.7 million bpd.

fneuhof@thenational.ae

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Miele coffee maker making Cappuccino at Miele Gallery in Sama Tower in Dubai. The cost of this coffee maker is around Dh 17,000. Pawan Singh / The National

Space-age coffee comes at a price from Miele

Miele have taken the coffee machine to a new level with its Dh17,000 offering that is built into your kitchen.

 The bridge of Seajacks Hydra, as the wind farm installation vessel undergoes finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014. Jeffrey E Biteng / The National

In pictures: Building the Seajacks Hydra

The Seajacks Hydra, a wind farm installation vessel, is undergoing finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 The rush of new supply of hotel rooms pushed Dubai occupancy rates down to 87 per cent. Sarah Dea / The National

Dubai hotel room rates rise 10 per cent

The rush of new supply pushed occupancy rates down to 87 per cent, a dip of 2.6 per cent from the previous year. Winter months are the strongest for Dubai hotels, with occupancy and prices falling to half their peaks by July.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National