North America Dominance in Fuel Trade to Grow on Shale, IEA Says

North America’s dominance of global exports of refined fuels will expand to unprecedented levels by 2019 as the shale revolution makes U.S. refineries more competitive, the International Energy Agency said.

The continent will become a “titan of unprecedented proportions” and its oil refineries will export about 3.5 million barrels a day by the end of the decade, the Paris-based adviser to 29 oil-consuming nations said in a report today. North America’s imports of crude will be 2.6 million.

“Less than ten years ago, the United States was the world’s largest importer of refined products,” the IEA said in its Medium-Term Oil Market Report, which forecasts energy-market trends. “Today it has become the world’s largest liquids producer, ahead of Saudi Arabia and Russia, as well as its largest product exporter.”

The shale supply surge means that U.S. oil refineries benefit from cheaper crude than their counterparts elsewhere in the world. West Texas Intermediate, the U.S. grade, has been cheaper than the global benchmark Brent for almost all of the past four years. The output expansion contrasts with the Organization of Petroleum Exporting Countries, whose producers may struggle to raise production amid political turmoil, security concerns and aging fields, the IEA said.

Brent crude prices remained “stubbornly high,” averaging more than $100 a barrel for the last three years as oil use grew in emerging economies and supply was disrupted in producing nations, the IEA said. The agency coordinated an emergency stockpile release in 2011 after an armed uprising in Libya choked global supplies.

Non-U.S. Shale

U.S. total liquids output will surge to 13.1 million barrels a day in 2019, from 10.3 million last year, an average gain of about 470,000 barrels a day per year, the agency said.

Producers outside the U.S. will also expand tight oil production to 650,000 barrels a day by 2019, the IEA forecast. Of that, 390,000 barrels a day will come from Canada, 100,000 from Russia and 90,000 from Argentina.

OPEC crude capacity is projected to grow 2.08 million barrels a day from 2013 to 2019 to reach 37.06 million at the end of the period, from 34.98 million last year, the IEA said. Iraq will contribute about 60 percent of the increase.

“While OPEC remains a vital supplier to the market, it faces significant headwinds in expanding capacity,” from political turbulence, military conflicts and lack of investment to maintain production from aging fields, Maria van der Hoeven, the IEA’s executive director, said in a statement.

Peak Demand

Global oil demand will rise to an average 99.06 million barrels a day by 2019, probably exceeding 100 million by the end of that year, the agency forecast. That reflects growth of 1.3 percent a year from 2013, mostly from emerging markets including China and India.

“Fuel switching, efficiency gains and clean-air regulations start eroding demand growth toward the end of the decade,” the IEA said. China’s decision to slow its economic expansion, combined with India’s policy of reducing subsidies, will probably cause oil demand gains to lose momentum, the IEA said.

“Peak oil demand growth for the market as a whole is already in sight,” the agency said.

Before it's here, it's on the Bloomberg Terminal.