Released August 16, 2019 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The global crude oil market looks to continue in an oversupply mode for the next several years, possibly until 2024. However, the supply-demand balance could tighten and prices could increase sharply if production from Libya, Venezuela or Nigeria stops, Bernadette Johnson, vice president of market intelligence at Drillinginfo Incorporated (Littleton, Colorado), told an Oil & Gas conference in Denver on Tuesday.
Speaking on Tuesday at the 24th annual The Oil & Gas Conference, sponsored by EnerCom Incorporated (Denver, Colorado), Johnson cited data from the International Energy Agency (Paris, France) showing that supply exceeded demand by about 2.7 million barrels per day (BBL/d) during the fourth quarter of 2018. The oversupply fell during the first and second quarters of this year, but is expected to continue for several years, she added.
Exactly how much the world could be oversupplied with oil, and for how long, depends on oil prices, production growth from the U.S., and production from countries that are in a high degree of turbulence, such as Venezuela, Iran and Nigeria.
"The demand story continues to dominate headlines and the market still is not recognizing it is in oversupply mode," Johnson continued. "That's what's keeping West Texas Intermediate (WTI) in the $50s-per-barrel range."
"But prices would be in for a big increase if we lose production from Libya, Nigeria or Venezuela," she added.
The EnerCom event was attended by about 2,000 people in the oil and gas industry, bankers, investors and analysts.
Johnson predicted U.S. crude oil production would grow by about 1 million BBL/d this year, about half of its 2 million BBL/d gain last year. In 2020, Drillinginfo predicts another 1 million BBL gain in U.S. supply. By 2023, she forecast, U.S. production could reach nearly 16 million BBL/d, up from about 12 million BBL/d today.
Click on the image at right to see a prediction of U.S. crude oil production to 2023.
The Drillinginfo vice president agreed with other analysts that are forecasting that the Permian Basin will drive production growth. "Right now, the U.S. is still growing production with less than 1,000 rigs operating, and over 50% of those rigs are in the Permian," she said, adding that more than 1,000 drilled-but-uncompleted (DUC) wells are in the Permian. Those wells can begin producing quickly if the crude-oil prices rise.
The export market has, in recent years, emerged as a critical safety valve, transporting domestic light sweet crude overseas while the U.S. imports heavier crude oil that can be processed by domestic refineries. She said she expects that trend to accelerate going forward, as U.S. production grows. "Nearly every incremental barrel we produce goes on the water," Johnson commented, estimating that the U.S. is exporting about 3.5 million BBL/d. Five years ago, the U.S. did not export any crude oil, as a decades-old law, since repealed, prohibited its export.
Click on the image at right to see a graphic of U.S. crude oil production and exports.
The Anadarko, Eagle Ford and Williston basins are home to many companies that can break even when WTI is priced between $50 and $65 per barrel, she said. However, there are many other companies that continue to operate in higher-cost areas, suggesting the consolidation and asset sales that have characterized the last few years will linger.
Johnson said the global oil market could get especially interesting in 2023-2024: "That's when we see a potential problem. Global oil production needs to grow by about 5 million BBL/d just to offset the declining production from existing wells. But because the industry missed an investment cycle, supply and demand could tighten and we could see $70-per-barrel oil."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Speaking on Tuesday at the 24th annual The Oil & Gas Conference, sponsored by EnerCom Incorporated (Denver, Colorado), Johnson cited data from the International Energy Agency (Paris, France) showing that supply exceeded demand by about 2.7 million barrels per day (BBL/d) during the fourth quarter of 2018. The oversupply fell during the first and second quarters of this year, but is expected to continue for several years, she added.
Exactly how much the world could be oversupplied with oil, and for how long, depends on oil prices, production growth from the U.S., and production from countries that are in a high degree of turbulence, such as Venezuela, Iran and Nigeria.
"The demand story continues to dominate headlines and the market still is not recognizing it is in oversupply mode," Johnson continued. "That's what's keeping West Texas Intermediate (WTI) in the $50s-per-barrel range."
"But prices would be in for a big increase if we lose production from Libya, Nigeria or Venezuela," she added.
The EnerCom event was attended by about 2,000 people in the oil and gas industry, bankers, investors and analysts.
Johnson predicted U.S. crude oil production would grow by about 1 million BBL/d this year, about half of its 2 million BBL/d gain last year. In 2020, Drillinginfo predicts another 1 million BBL gain in U.S. supply. By 2023, she forecast, U.S. production could reach nearly 16 million BBL/d, up from about 12 million BBL/d today.
The Drillinginfo vice president agreed with other analysts that are forecasting that the Permian Basin will drive production growth. "Right now, the U.S. is still growing production with less than 1,000 rigs operating, and over 50% of those rigs are in the Permian," she said, adding that more than 1,000 drilled-but-uncompleted (DUC) wells are in the Permian. Those wells can begin producing quickly if the crude-oil prices rise.
The export market has, in recent years, emerged as a critical safety valve, transporting domestic light sweet crude overseas while the U.S. imports heavier crude oil that can be processed by domestic refineries. She said she expects that trend to accelerate going forward, as U.S. production grows. "Nearly every incremental barrel we produce goes on the water," Johnson commented, estimating that the U.S. is exporting about 3.5 million BBL/d. Five years ago, the U.S. did not export any crude oil, as a decades-old law, since repealed, prohibited its export.
The Anadarko, Eagle Ford and Williston basins are home to many companies that can break even when WTI is priced between $50 and $65 per barrel, she said. However, there are many other companies that continue to operate in higher-cost areas, suggesting the consolidation and asset sales that have characterized the last few years will linger.
Johnson said the global oil market could get especially interesting in 2023-2024: "That's when we see a potential problem. Global oil production needs to grow by about 5 million BBL/d just to offset the declining production from existing wells. But because the industry missed an investment cycle, supply and demand could tighten and we could see $70-per-barrel oil."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
