International

U.S. oil boom to extend into 2015, risks remain: IEA

LONDON: Global oil demand growth will accelerate next year as the world economy expands and will again be met by rising supplies from the United States and Canada, further eroding OPEC’s market share, the West’s energy watchdog said Friday.

But the International Energy Agency said in its monthly report that risks to oil production in several regions remained acute.

“Supply risks in the Middle East and North Africa, not least in Iraq and Libya, remain extraordinarily high,” the IEA said. “Oil prices remain historically high and there is no sign of a turning of the tide.”

“Whether in crude or product markets, there is little room for complacency,” it added.

North Sea Brent crude oil hit a nine-month high above $115 a barrel in June as a Sunni Islamist insurgency swept across northwestern Iraq, taking control of large parts of the oil producing country and shutting down its largest refinery.

The oil market has weakened over the last month but remains nervous about further supply shocks. Brent was trading at around $108.20 a barrel by 7:30 a.m. GMT Friday.

Making its first forecasts for 2015, the IEA – which advises major consuming nations on energy policy – said it expected global oil demand to grow by 1.4 million barrels per day next year, up from 1.2 million this year.

“Newly industrialized and emerging market economies are once again forecast to lead the gains,” it said.

The world’s second largest oil consumer, China, will see oil demand grow by 4.2 percent, up from 3.3 percent this year, while the largest oil user – the United States – will only see gains of 0.2 percent to 19.1 million barrels per day, up from growth of 0.6 percent this year.

The IEA said it expected non-OPEC supply growth to average 1.2 million bpd next year, in line with increases in 2013 and 2014.

“The U.S. and Canada remain the mainstays for growth, but sources are expected to be more diverse than in 2014,” said the IEA, naming Brazil, Britain, Vietnam, Malaysia, Norway and Columbia among countries that would give a boost to output in 2015.

North America will remain the leader in 2015, contributing about two-thirds of the net non-OPEC supply increase compared with 85 percent in 2014.

U.S. light tight oil, mostly from North Dakota and Texas, as well as Canadian bitumen, represent well over half of 2014 non-OPEC supply growth, the IEA said.

It added that the Eagle Ford Shale Play in south Texas would remain one of the most dynamic oil provinces, with their output growing by 34 percent to 1.4 million bpd this year and exceeding 1.6 million next year.

“Certain OPEC countries have experienced severe disruptions, so North America has made the difference in terms of avoiding severely constrained global supply,” the report said.

The U.S. shale oil boom has eroded the market share of the Organization of Petroleum Exporting Countries and the trend will likely continue next year, it said.

The IEA forecast demand for OPEC crude would edge down in 2015 to 29.8 million bpd, from 29.9 million this year. That is slightly below the level pumped by the group in June at just over 30 million bpd.

Insurgency in Iraq remains among the main threats to OPEC’s production targets, with output down by 260,000 bpd in June alone to 3.17 million bpd after an assault by the militants forced the closure of the Iraq’s biggest refinery at Baiji and cut production from the giant Kirkuk field.

“A month-long military campaign by radical militants has shaken Iraq’s foundation and threatened oil operations in the north of the country, but the prized oil fields in the south are so far insulated from the fighting,” the IEA said.

It added that exports from Iraq’s giant southern fields were down in June mostly due to logistical snags and maintenance works at the Gulf Basra terminal.

“Prolonged sectarian bloodshed may shake investor confidence and set back longer-term growth in the country that had been poised to provide the biggest source of new OPEC capacity over the next decade,” the IEA said.

Iran also saw a steep decline in exports in June to 1.08 million bpd after running at an average of 1.42 million bpd in January-May, partially because of lower Chinese purchases to fill its strategic reserve.

 
A version of this article appeared in the print edition of The Daily Star on July 12, 2014, on page 4.

Recommended





Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

Alert: If you are facing problems with posting comments, please note that you must verify your email with Disqus prior to posting a comment. follow this link to make sure your account meets the requirements. (http://bit.ly/vDisqus)

comments powered by Disqus

Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here