Nigeria minister says majors in shale, OPEC should keep crude price stable

Nigeria minister says majors in shale, OPEC should keep crude price stable

In its annual outlook for world oil markets, the Paris-based agency forecast that the U.S., Canada and Norway will account for virtually all global supply growth over the next five years, and warns of a long-term supply crunch unless investment increases to satisfy growing demand. That's because American refineries are geared to process medium and heavy grades and crude while the shale fields produce light oil.

It says after this point, additional investment will be needed to spur supply growth, following the industry's two-year drop in investment in 2015 and 2016, which is compounded by lower upstream spending taking place outside of the US. Production from the prolific Permian Basin will double over the period and the country's total liquid hydrocarbon output will rise to 17 million barrels a day from 13.2 million past year.

"Global economic growth is lifting more people into the middle class in developing countries and higher incomes mean sharply rising demand for consumer goods and services", the IEA said. The unintended effect was to make USA production from its shale plays profitable again.

Naphtha is made by oil refineries processing crude, but other petrochemical feedstocks - ethane or liquefied petroleum gas (LPG) - are processed outside traditional oil refineries.

Global oil demand is forecast to rise from 97.8 million barrels a day now to 104.7 million by 2023, with China remaining as the principal driver of growth.

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It said growth is led by the Permian Basin, where output is expected to double by 2023.

In the United States, fuel-economy standards for passenger cars will curb gasoline demand with growth coming from the petrochemical sector, which is thriving thanks to low-priced ethane. "Without large-scale capital investment, the US domestic market can only absorb about a quarter of the additional four million b/d of USA crude expected to enter markets [by] 2023, leaving the rest for exports", Wood Mackenzie said.

More than 80 percent of global vehicle sales are now in markets covered by efficiency standards, including China, India the United States and Europe. Birol said oil companies were "absolutely not" investing enough in future production, with the potential for demand to overtake supply in the late 2020s.

The export market will also still be constrained even with Enbridge's expected 450,000 barrels a day of expansion, but the IEA raised doubts that the capacity additions from Kinder Morgan's Trans Mountain and TransCanada's Keystone XL pipeline projects will actually get built. The result could be the thinnest margin of oil-production capacity over demand in more than a decade.

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