Business

As Oil Prices Recover, IEA Says US Will Soon Equal Russia, Saudi Output

By Akanimo Sampson

Head of the International Energy Agency (IEA) Fatih Birol, says the total oil production in the United States will equal that of Russia and Saudi Arabia’s combined output by 2025.

He made the disclosure in an interview with Turkey’s state news agency Anadolu, noting also that oil prices could no longer be determined by the countries in the Middle East and Russia, and that US production will ‘’completely change the balance of oil markets.’’

This is coming as oil prices are recovering after the biggest monthly drop in 10 years. After Saudi Arabia’s Crown prince Mohammed bin Salman and Russian President Vladimir Putin agreed to extend their agreement on oil production cuts ahead of OPEC talks in Vienna on December 6. 

Oil prices had dropped by about 30 percent after hitting four-year highs in early October, with the drop spurred by worries of falling demand and potential oversupply.

As such, a series of recent events helped improve optimism about the outlook for the oil market.

Russia’s agreement with Saudi Arabia has renewed confidence that OPEC will be able to reach an agreement at its Vienna meeting. An announcement from Canada that it will cut production in Alberta by 325,000 barrels per day also helped prices, and the US-China trade war truce pushed a more optimistic market sentiment.

OPEC’s plan for production in 2019 still remains to be seen, and details are not yet available, although an OPEC advisory body said a cut of 1.3mn bpd would balance the market in 2019, according to Bloomberg.

US production is however, driving by the extraction of shale resources, is expected to grow by 3.7mn barrels per day (bpd) by 2023. Global production capacity is expected to grow 6.4mn bpd in the same time period.

The IEA has repeatedly emphasised the growing role that the US will play in the global energy landscape; it currently produced 11mn bpd, record levels for the nation.

While US production is expected to continue growing, OPEC and its allies will cut production in 2019 in an attempt to balance supply and demand. By comparison, the US Energy Information Administration forecasts US production to reach an average 12.1mn bpd in 2019.

It estimates US crude oil production at an average of 11.5mn bpd in November, up 150,000bpd from October. In 2018, the US averaged 10.9mn bpd, up from 9.4mn bpd in 2017.

Birol noted that the IEA expects declining oil prices and some volatility going forward, with geopolitical events adding to price uncertainty. He noted that countries with oil-based economies should diversify in order to minimise risks to their growth.

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