Oil markets oversupplied amid 'staggering' US shale boom: BP's Ruhl
London (Platts)--7Jun2013/710 am EDT/1110 GMT
The global oil market remains currently oversupplied helped by
"staggering" US production gains which are eating into the demand for
OPEC's oil, according to BP's chief economist, Christof Ruhl.
Booming volumes of unconventional light, tight oil output from the US
are forcing OPEC to consider idling more of its production capacity in
order to prop up oil prices, Ruhl said late Thursday.
"The production numbers for the US are quite staggering, so far they
have always surprised to the upside," Ruhl said on the sidelines of a
conference organized by Columbia University's Center on Global Energy
Policy.
The US will surpass Saudi Arabia this year as the world's biggest
producer of oil and biofuels combined, a title that the OPEC kingpin
will likely only regain in 15 years time, BP has said.
Driven by shale oil supplies from the US, global shale oil production
could rise to reach 14 million b/d by 2035, or 12% of the world's total
oil supply, accountants PwC estimated earlier this year.
As result, OPEC's spare oil production capacity will likely rise to over
6 million b/d by 2015, the highest since the late 1980s, Ruhl said
citing BP's long-term energy outlook published in January.
OPEC, which opted last week to hold its output ceiling steady at 30.5
million b/d, is currently producing 1.8 million b/d more than the global
"call" for its oil, according to the latest monthly estimates by the
International Energy Agency.
The short-term oil price impact of the current oversupply depends on how
OPEC reacts to pressure to cut production, Ruhl said, adding -- however
-- that BP believes "OPEC will be willing and able to cut production,"
to support oil prices.
OIL PRICES
Helped by weak global demand for oil, the rising tide of shale oil
production has already helped depress oil prices this year, Ruhl said.
Brent oil prices were trading just above $104/barrel in London Friday,
some 13% lower than a recent high of more than $119/b in early February.
In mid-April, Dated Brent crude fell below $98/barrel -- the lowest
level that the market has seen since July 2012.
Ruhl said oil prices have also retreated largely due to the lack of
major supply interruptions and the "appreciable" level of global oil
inventories.
But oil prices are being shielded from further downward pressure mainly
by fears of fresh supply disruptions in key producers in Africa and the
Middle East, he said.
"The real question is why are oil prices still where they are today? The
short answer is because we had big supply disruptions, Libya in 2011,
Iran in 2012. Saudi Arabia had responding responsibly and produced a lot
more and then started to cut back production," he said.
Earlier this month, the IEA said a "shockwave" of rising shale and oil
sands production would result in North American oil supply climbing by
3.9 million b/d over the next five years. The agency expects US shale
oil production to account for 2.3 million b/d of that increase and to
push US crude production to 8.4 million b/d.
The IEA sees demand for OPEC crude remaining firmly below 30 million b/d
on an annual basis for the next few years.
--Robert Perkins,
robert.perkins@platts.com
--Edited by James Leech,
james.leech@platts.com
© 2013 Platts, The McGraw-Hill Companies Inc. All rights reserved.
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