Oil Growth Coming from Just Four Countries, EIA Finds

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Just four countries from outside the core group of the Organization of the Petroleum Exporting Countries (OPEC) and its allies account for the bulk of expected oil production growth and the vast majority of that will come from the United States, data show.

The U.S. Energy Information Administration (EIA), the statistical arm of the Energy Department, said it expects global production of petroleum and other liquids to increase by 400,000 barrels per day (BBL/d) this year and another 2 million BBL/d in 2025.

"This growth will be driven primarily by rising crude oil production from four countries in the Americas--the United States, Guyana, Canada and Brazil--which would partially offset near-term voluntary production cuts in 2024 that we expect from countries participating in the OPEC+ agreement," EIA's analysis found.

OPEC+ is the core group of members, along with non-member state allies such as Russia. The group said that recent voluntary cuts of a collective 2.2 million BBL/d were "aimed at supporting the stability and balance of oil markets." Much of the heavy lifting, meanwhile, comes from Saudi Arabia, the group's de facto leader.

The organization has managed to stick to the plan and show some degree of cohesion against budgetary pressures and defections. Angola left the group last year and, at around $85 per barrel for Brent, prices are well below the point where many producers are making a buck.

The need for price stability, however, comes against a backdrop of lingering inflationary pressures in major Western economies, a concern that's increasingly prevalent in a U.S. economy during a presidential election year.

President Joe Biden opted to release oil from U.S. strategic reserves during the early stages of the war in Ukraine to offset the inflationary pressures coming from the energy sector as a result of supply-side issues.

The price for Brent crude oil flirted with $130 per barrel in mid-2022 but has been largely rangebound in the low- to mid-$80 range for much of 2024. Geopolitical risk and seasonal factors aside, expectations of a return to a prolonged period of triple-digit crude oil are rather low. EIA expects Brent to average $87 per barrel this year.

Supply-side pressures should be relatively low given the move toward renewable resources and forecasts for growth. Energy consultant group Wood Mackenzie (Edinburgh, Scotland) expects to see US$125 billion in new investments in upstream activity this year as program mangers dust off projects that have been delayed or postponed.

That means as much as 14 million barrels of oil equivalent could be sanctioned this year through various final investment decisions, and most of that will come from offshore reserves.

"With many projects delayed or postponed, we expect operators to commit to more projects in 2024 than last year," said Ross McGavin, a principal analyst at Wood Mackenzie. "National oil companies (NOCs) in the Middle East will control the most projects, but the majors will be busy as well, particularly as they prioritise advantaged deepwater resources."

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