OPEC overlooked in surge of American oil production spurring demand growth
In a significant shift for the global oil market, the International Energy Agency (IEA) has reported that North America is increasing its share of supply growth, both within the non-OPEC group and globally. This trend is largely due to the surge in US shale oil production, which is challenging conventional wisdom and causing a shift in natural gas pricing.
According to the IEA, US shale oil production is expected to plateau through the rest of the 2020s, with light tight oil reaching about 9.8 million barrels per day (mbd) by 2030. This plateau results from lower oil prices leading companies to scale back spending and consolidation in the sector.
The steady growth and plateauing supply of US shale oil contribute to a global oil supply surplus, which weighs on prices and reduces OPEC’s incentive or ability to significantly increase output. OPEC+ is likely to maintain cautious production planning to balance the market and stabilize prices amid steady non-OPEC supply growth, including shale.
Global oil demand is projected to grow modestly by about 2.5 mbd between 2024 and 2030, reaching around 105.5 mbd. This growth will be dominated by growth in non-crude liquids but will also include shale. This dynamic suggests a comfortably supplied market with persistent supply surpluses and moderate price pressure.
Stable to slightly lower oil prices (Brent crude forecasted around $60-$70 per barrel range by various analysts through 2026) reflect the balance of US shale plateau, modest demand growth, and OPEC+ cautious output. Meanwhile, the US itself may see an uptick in oil demand by 2030 due to slower adoption of electric vehicles and lower gasoline prices, contrasting with demand peaking in countries like China.
In summary, US shale oil production will likely cap significant supply growth from non-OPEC sources, contributing to persistent but manageable global supply surpluses. This will influence OPEC to maintain a cautious output strategy rather than aggressively ramping production, while global demand growth slows and peaks in key markets. The global oil market is expected to remain well supplied but volatile, with price pressure constraining OPEC’s output expansion in the near term through 2030.
References: [1] International Energy Agency (IEA) (2018). World Energy Outlook 2018. Paris: IEA. [2] International Energy Agency (IEA) (2019). Oil 2019. Paris: IEA. [3] International Energy Agency (IEA) (2019). World Energy Outlook 2019. Paris: IEA. [4] Various analysts, including the Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC).
- The US shale oil industry, which is expected to plateau by 2030, will continue to impact the global oil market, influencing the finance sector as investors weigh the future of light tight oil production and supply surpluses.
- The energy sector, particularly the oil-and-gas industry, is anticipating stable to slightly lower oil prices due to the steady supply of US shale oil and modest global demand growth, creating a business environment with persistent supply surpluses and moderate price pressure.
