PARIS: Booming oil output in the United States — which has threatened to derail other producers’ efforts to drive up crude prices — looks set to expand strongly again this year, OPEC said Monday.
But rising inflation and possible trade restrictions could throw a spanner in the works for US producers in the longer term, the Organization of Petroleum Exporting Countries said in a report.
The US is not a member of OPEC which accounts for more than 40 percent of the global oil market.
But booming output of US shale producers — eager to cash in on a rally in oil prices since late last year — has proven a headache for combined efforts by both OPEC members and non-members to cut back production to combat a global oil glut.
While those efforts have indeed succeeded in pushing up prices in recent months, rising crude prices have at the same time made it more attractive for shale producers — whose overheads are lower than the oil majors — to ramp up output.
OPEC has repeatedly warned that booming US shale production could jeopardise the delicate balance that the overall market has managed to reach.
In its latest monthly oil market report, OPEC upgraded its forecast for non-OPEC output and said that the US would account for the largest share of the projected increase.
Following a contraction in 2016, “non-OPEC oil supply has seen a recovery in 2017 and 2018… This has been on the back of improving oil market conditions and rising oil prices,” the report said.
Nevertheless, it was “evident that uncertainties remain as to the forecast pace of growth of non-OPEC supply for the remainder of the year,” the cartel cautioned.
The performance of non-OPEC supply in 2018 would depend on many factors, it said.
“The continued strong development of the world economy could lead to rising inflation, and, along with potential trade restrictions, would impact oil production costs.”
In addition, fast-growing production in the US was “increasingly faced with costly logistical constraints in terms of outtake capacity from land-locked production sites,” OPEC said.
US producers’ capital spending plans could also be hit by pressure from shareholders demanding capital discipline and a return on their investments, it said.
OPEC said that geopolitical developments “will also continue to impact global oil supply developments in the months ahead,” OPEC said.
“Despite the large uncertainties prevailing in key market fundamentals, OPEC, as always, stands ready to support oil market stability, together with non-OPEC oil producing nations,” the cartel said.—AFP