Page 7 - NorthAmOil Week 48

NorthAmOil COMMENTARY NorthAmOil
“These changes in the US energy balance could turn its petroleum deficit of $62bn in 2018 to a surplus of $340bn by 2030. That adds up to a $400bn shift, in the space of only a dozen years, thanks primarily to the gargantuan rise of output from the US shale sector.”
What next?
Even if the US production slowdown plays out as expected, the current momentum appears set to continue into next year. In its latest short-term energy outlook, the EIA has forecast that the US’ total net exports of crude and products will reach 750,000 bpd in 2020, compared with average net imports of 520,000 bpd this year.
The agency also forecasts that US crude pro- duction will rise above 13mn bpd during the final quarter of this year, growing further to average 13.29mn bpd in 2020 compared with 12.29mn bpd in 2019. While this would mark a slight slowdown from this year’s growth rate, with output forecast to average 1.3mn bpd more in 2019 than it did last year, it nonetheless illus- trates expectations of further growth.
However, while US reliance on foreign crude has been on the decline, the country appears set to remain a net importer of oil for the fore- seeable future. This can be attributed to the fact that US output is increasingly made up of lighter grades of crude, while the country’s refiner- ies are primarily configured to process heavy oil. The country thus continues buying heavy crude from overseas to meet the demand of its
refiners. It also purchases refined petroleum products from foreign suppliers when they are available for a lower cost than what it is produc- ing domestically.
Nonetheless, growing domestic output makes the US less vulnerable to overseas supply shocks, even when taking the headwinds shale drillers are facing into consideration. The poten- tial downside of this is the impact it could have on oil prices, which are increasingly forecast to remain low owing to abundant global supply, including US shale. This was already evident ear- lier this year, when a major disruption to Saudi Arabia’s oil production caused benchmark crude prices to spike briefly in mid-September, before dropping back down again.
There have been plenty of warnings in recent years that new investment into megaprojects is needed in order to avoid future shortages of global oil supply. However, this point has not yet been reached. Indeed, ahead of a meeting of OPEC countries plus Russia later this week to discuss oil production levels in 2020, those countries are being called on to agree to even steeper output cuts next year in order to prop up crude prices. The producers are expected at least to extend output curbs into next year, but Rystad warned this week that this might not be enough to avoid a substantial build of global crude stocks and a corresponding drop in oil prices.
“The outlook will be bleak if OPEC+ fails to agree on additional cuts,” Rystad’s head of oil market research, Bjørnar Tonhaugen, said.™
Growing domestic output makes the US less vulnerable to overseas supply shocks.
Week 48 04•December•2019 w w w . N E W S B A S E . c o m
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