IEA’s OUTLOOK: America To Remain Number One
The International Energy Administration’s (IEA) July Oil Market Report projects U.S. producers to extend their lead in global oil and gas production through next year. If their projection holds, 2025 would mark the seventh consecutive year of American dominance despite a sluggish year-over-year demand of 710 thousand barrels of oil per day (kd/d) increase (the slowest rate in six quarters).
Soft oil prices in the first half of the year finally found some support in June, according to the IEA, with firming prices a function of stock reductions, investor short covering, and geopolitical risks related to the Middle East and Russia’s conflict in Ukraine.
Looking forward, the report cites a slowing Chinese economy, efficiency gains, and the growing adoption of electric vehicles (EVs) as drags on demand.
Domestic producers’ collective 13MMb/d capacity (down from last December’s all-time high of13.3 MMb/d) is projected to keep American oil and gas firmly in control of its number one spot. IEA notes main rivals Russia and Saudi Arabia have dropped far further from their peaks, both around 10.6 MMb/d (peaking in 2019 for Russia, 2022 for the Saudis). Currently, Russia is producing 9.2 MMb/d, the Saudis 8.9 MMb/d.
IEA further expects the U.S. to remain the top natural gas producer globally, pointing to additional exporting facilities coming online.
OPEC’S OPTIMISM: A Good Year Ahead
The Organization of the Petroleum Exporting Countries (OPEC), according to The Wall Street Journal (July 11, 2024), is more bullish about global oil demand than the IEA.
OPEC maintains their estimate of 1.8 MMb/d demand growth for next year, driven by transportation, manufacturing, and petrochemical demand from a resilient global economy.
Though the group warns that the current high cost of capital due to high interest rates could postpone needed investments to meet energy demands should its positive outlook on the global economy come to pass, it nonetheless cites anticipated easing inflation and resulting lower interest rates as key drivers behind its projections.
Another factor affecting supply and demand is the group’s agreement to continue production cuts struck last month. The agreement calls for more production starting in October for the next year. How and when to open up the taps more and by how much I yet to be determined.
By Jim Felton for oilandgas360
