Global oil market to rely more on Middle East as U.S. output falls, experts

Source: Xinhua| 2020-10-17 12:09:28|Editor: huaxia

NEW YORK, Oct. 16 (Xinhua) -- Global oil market will rely more on the Middle East as U.S. shale oil production is expected to continue to fall, according to industry experts.

U.S. shale oil production will fall by 900,000 barrels per day in 2020 and drop another 1.1 million barrels per day in 2021, according to S&P Global Platts.

"It will be OPEC (the Organization of the Petroleum Exporting Countries) that will fill the gap for that supply loss as demand recovers," although some of the non-OPEC countries like Canada, Brazil and producers from Europe's North Sea will fill some of the gap, said Chris Midgley, global head of analytics with S&P Global Platts, on Friday.

Speaking at a media briefing, Midgley said "ultimately, it will be OPEC that will be needed to fill the gap if it's required."

For the week ending Oct., 9, U.S. averaged daily crude oil stood at 10.5 million barrels in comparison with 13 million barrels or higher in February and March 2020, according to the website of U.S. Energy Information Administration (EIA).

The EIA predicted that U.S. averaged crude oil production will fall from 12.2 million barrels per day in 2019 to 11.5 million barrels per day in 2020 and 11.1 million barrels per day in 2021.

However, U.S. crude oil production will be 2 million barrels per day lower by 2024 if Democrats win in the upcoming general election and ban fracking of shale oil and gas, according to S&P Global Platts.

In the long run, U.S. tight oil production is not likely to reach heights projected in previous years and will peak around 2030 while OPEC liquids will fill the gap, according to 2020 OPEC World Oil Outlook, a report issued recently.

Higher dependence on crude oil supply from the Middle East will be bearish to oil prices as Libya's crude oil output now is set to increase and Iranian crude oil could come back to the market if the United States resumes renegotiations on Iran nuclear issues, according to Shin Kim, head of supply and production analytics with S&P Global Platts.

Kim added that OPEC is also set to taper their production cuts in January 2021.

The oil market has gone through dynamic equilibrium in the summer and started a wobble at the end of September, said Midgley.

China's purchase of crude oil is providing support to oil prices and the floor price of crude oil is largely depends on whether China buys, according to Midgley.

Midgley said the oil market will continue to have real headwinds and find it difficult to get out of where it is now. "We see that really lasting well into next year, because we're really not going to see things tightened." Enditem