The International Energy Agency estimates that non-OPEC oil producers led by the U.S., Canada and Kazakhstan will bolster supplies next year by the most since the 1970s, undermining the need for OPEC’s crude.
Producers outside the Organization of Petroleum Exporting Countries will increase 2014 output by a near-record 1.7 million barrels a day to 56.4 million, the IEA said, boosting its forecasts from a month ago by 300,000 barrels a day. Supply losses in OPEC members Libya and Iraq, which reduced the group’s output to a two-year low, are preventing the new shipments from calming oil prices, the Paris-based adviser to energy-consuming nations said.
“Non-OPEC crude and other liquids supply scaled new heights lately” and this “surge looks less like a one-off than a preview,” the IEA said today in its monthly market report. “Amid exceptional outages in Libya and Iraq, this gusher didn’t do much to douse oil markets, though. With OPEC losses partly canceling out North American gains, crude prices have remained well-supported.”
Brent traded at about $111 a barrel in London today, little changed this year, as supply disruptions in North Africa and tensions in the Middle East are balanced by signs of slowing economic expansion in emerging economies and a budget impasse in the U.S. Crude from shale formations in Texas and North Dakota is helping the world’s largest oil consumer achieve its highest level of energy independence in more than two decades.
“Prices dropped after the IEA published their monthly forecast,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna. “If the IEA picture on the supply side is correct, there is a real risk that Brent prices will drop below $100 a barrel during 2014.”
Brent crude on the ICE Futures Europe exchange in London fell as much as 0.7 percent following the release of the report at 9 a.m. London time.
The jump in non-OPEC supply prompted the agency to trim estimates for the amount of crude OPEC will need to provide next year, even as world demand increases. OPEC’s 12 members will need to pump an average 29 million barrels a day in 2014, about 100,000 less than the IEA had predicted last month and almost 1 million a day less than the group is currently producing.
OPEC output slumped by 645,000 barrels a day in September to less than 30 million a day for the first time in almost two years as labor unrest crippled Libya’s export facilities and Iraq conducted maintenance at its southern oil terminal, the agency said. Saudi Arabia, the organization’s largest member and de facto leader, maintained output above 10 million barrels a day for a third consecutive month, according to the report.
The agency trimmed its forecast for global oil demand growth in 2014. World fuel consumption will increase by 1.1 million barrels, or 1.2 percent, to 92 million barrels a day in 2014, according to the report. The expansion in demand is about 100,000 barrels a day less than the IEA forecast last month.
“Demand growth, as an improvement from the past few years, looks solid within the context of what’s been a weak macroeconomic environment,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “Non-OPEC supply growth appears extremely robust, driven by North America but also the former Soviet Union as Kashagan in Kazakhstan and the eastern Siberian fields in Russia ramp up.”
The U.S. will boost production by 830,000 barrels a day, or 8.1 percent, next year to 11 million a day amid supply growth at the Eagle Ford and Bakken deposits. The nation will surpass Russia as the largest producer of liquids outside OPEC in the second quarter of next year, the IEA said.
Kazakhstan made the biggest contribution to the agency’s reassessment of 2014 supplies, with the start of the Kashagan field adding 140,000 barrels a day.
Total inventories of crude and refined products in the most industrialized nations equate to about 58.6 days worth of consumption, or 0.1 day above their five-year average, after increasing by 7.8 million barrels in August to 2.7 billion barrels, according to the report.
-- Editors: Raj Rajendran, Randall Hackley