“Production from the booming Permian Basin is forecast to grow without any constraints,” OPEC wrote in its monthly report.
That growth is good news for American drivers, who should benefit from gas prices staying in check.
OPEC noted that America’s oil infrastructure problems — namely, limited pipelines linking Texas to refineries in the US Gulf Coast — will go away as new capacity is completed in the coming months.
US shale is likely to “dominate” non-OPEC supply growth in 2020, OPEC said.
Texas alone is expected to soon top 5 million barrels per day in oil production — more than any OPEC member other than Saudi Arabia.
OPEC for the first time projected world appetite for its oil for 2020, and the numbers aren’t pretty. The cartel expects demand for its output will decline next year by 1.3 million barrels to 29.27 million.
At the same time, OPEC said its production dipped slightly in June to 29.83 million barrels. That implies a surplus of about half a million barrels, assuming OPEC continues to pump at current levels.
Record-shattering US oil growth
The oversupply in 2020 comes as OPEC and its allies attempt to bring about equilibrium in the market. Earlier this month, OPEC agreed to extend its production cuts until March 2020. Those cuts, first implemented in 2017, were set to expire.
“If there is a glut, it will be US-driven,” said Ryan Fitzmaurice, energy strategist at Rabobank.
The shale boom has mitigated supply concerns caused by the Iran tensions as well as US sanctions on Venezuela.
In 2018, the United States pumped an average of 11 million barrels per day, marking a record high for total production as well as year-over-year growth, according to the US Energy Information Administration.
The EIA projects a deceleration in US growth for 2020, but still another record-high of 13.3 million barrels per day. Most of the extra barrels are expected to come from the Permian Basin, the EIA said.
US oil exports could triple
The continued shale boom will pave the way for more US oil to get shipped overseas, competing with barrels sold by OPEC.
Thanks to pipeline expansions and port enhancements in Corpus Christi, Texas and elsewhere, OPEC said daily US oil exports are expected to nearly triple from about 1 million barrels currently to 2.9 million barrels by the end of 2020.
Some analysts believe OPEC is too negative on the world’s thirst for oil.
New regulations, known as IMO 2020, will require ships next year to use low-sulfur fuel in a bid to reduce emissions. That shift away from dirtier fuel will force refineries to use more oil and run at a faster clip.
“Assuming there isn’t a total economic collapse, the IMO will show healthy demand increases,” said Rabobank’s Fitzmaurice. “I’m still bullish on oil prices.”
Source : CNN