x Abu Dhabi, UAEFriday 21 July 2017

Shale oil to pressure world prices

Oil unlocked from shale formations is set to create a supply glut that could push down crude prices, according to a new study.

Oil unlocked from shale formations is set to create a supply glut that could push down crude prices, according to a new study.

Global production capacity at oilfields will increase by 17.6 million barrels per day (bpd) over the next eight years thanks in part to shale, the most significant increase in any decade since the 1980s, according to Leonardo Maugeri, a research fellow at Harvard Kennedy School's Belfer Center for Science and International Affairs.

"Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption," wrote Mr Maugeri, who is also a former senior vice president for corporate strategy and planning at Italy's Eni. "This could lead to a glut of overproduction and a steep dip in oil prices."

The United States and Iraq are forecast to lead the production increase through 2020, with Saudi Arabia, Russia and China contributing more modest additions. Pumping levels are forecast to decline in Iran, Mexico and the United Kingdom.

US producers of shale oil need crude to be priced only above US$50 to $65 a barrel for their operations to remain profitable.

The development of shale oil has already made North Dakota, home of the Bakken formation, a bigger oil producer than the Opec member Ecuador. Mr Maugeri writes that North Dakota and its neighbour Montana could become the equivalent of a large Gulf producing country within the US.

ayee@thenational.ae