CRUDE prices have come under renewed pressure after experts predicted a record increase in production in US shale areas in coming years would cause major market upheaval.
The International Energy Agency forecast US shale output will increase by eight million barrels per day in the period to 2035 making the country the biggest producer in the world by far.
“A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50 per cent higher than any other country has ever managed,” said the organisation in its latest World Energy Outlook.
Executive director Fatih Birol noted: “The US becomes the undisputed leader for oil and gas production for decades, which represents a major upheaval for international market dynamics.”
The publication of the report on Tuesday was followed by a sharp fall in the price of Brent crude which will cause concern in the North Sea.
Brent crude lost further ground yesterday, trading at $61.92 per barrel in the afternoon.
The fall may dim hopes the fragile recovery in the North Sea is set to gather pace.
These were encouraged after Brent crude hit a two year high of $64.65/bbl last week following political upheaval in Saudi Arabia, which sector-watchers thought might affect investment in the kingdom’s oil and gas industry.
But UBS investment bank said yesterday there was little reason to expect a drop in supplies from Saudi Arabia.
Chief investment officer Mark Haefele said a sharp and sustained rise in the price of oil would only follow if there was serious political turmoil in Saudi Arabia, or through an escalation of proxy wars in the wider region.
UBS expects oil to “trade sideways” over the coming year with a 12 month forecast of $57/bbl. Brent sold for $115/bbl in June 2014.
It plunged sharply after growth in production ran well ahead of demand. The increase in output was powered by the emergence of US shale as a major new force.
OPEC members led by Saudi Arabia agreed last November to curb output to support the market.
The IEA’s analysis underlines the scale of the challenge they face. Shale producers have capitalised on advances in technology to cut production costs to levels that mean they can live with low prices.
Industry body Oil & Gas UK noted recently continuing pressure to squeeze costs out of the North Sea supply chain. While firms have cut production expenses by around a half since 2014, it still costs more to operate in the area than in comparable basins around the world.
Separately Aberdeen-based Eland Oil & Gas said it has achieved record output from onshore fields in Nigeria, where it can produce relatively cheaply.
Eland and partners have been producing 7,500 barrels oil daily from the Opuama-7 well which came online recently, against an expected 5,900 bod.
Total production from the three wells operating on the Opuama field is running at 19,000 bod.
The partners produced an average 12,000 bopd in total from 1 July to 20 October from two wells.
Chief executive George Maxwell believes Eland can prosper in Nigeria where it has faced security challenges.
It suspended production from Opuama in February last year because the Forcados terminal used to handle output was shut down due to sabotage. The Shell-operated terminal reopened in May.
The Paris-based IEA expects demand for energy to increase by 30 per cent by 2040, on 2015 levels, reflecting economic growth in Asia. Much of the additional demand will be met by renewable energy and increased use of natural gas.
“Global oil demand continues to grow to 2040, although at a steadily decreasing pace,” said the IEA.
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