Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here’s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

The oil war is only just getting started

By Tsvetana Paraskova - posted Tuesday, 7 February 2017


It's been a month now that investors and analysts have been closely watching two main drivers for oil prices: how OPEC is doing with the supply-cut deal, and how U.S. shale is responding to fifty-plus-dollar oil with rebounding drilling activity. Those two main factors are largely neutralizing each other, and are putting a floor and a cap to a price range of between $50 and $60.

The US rig count has been rising, while OPEC seems unfazed by the resurgence in North American shale activity and is trying to convince the market (and itself) and prove that it would be mostly adhering to the promise to curtail supply in an effort to boost prices and bring markets back to balance. In the next couple of months, official production figures will point to who's winning this round of the oil wars.

This would be the short-term game between low-cost producers and higher-cost producers.

Advertisement

In the longer run, the latest energy outlook by supermajor BP points to another looming battle for market share, where low-cost producers may try to boost market shares before oil demand peaks.

BP's Energy Outlook 2017 estimates that there is an abundance of oil resources, and "known resources today dwarf the world's likely consumption of oil out to 2050 and beyond".

"In a world where there's an abundance of potential oil reserves and supply, what we may see is low-cost producers producing ever-increasing amounts of that oil and higher-cost producers getting gradually crowded out," Spencer Dale, BP group chief economist said.

In BP's definition of low-cost producers, the majority of the lowest-cost resources sit in large, conventional onshore oilfields, particularly in the Middle East and Russia.

Although this view that low-cost producers would try to seize more market share comes from an oil major with significant interests in Russia and Iraq, for example, BP may not be wrong in predicting that the abundance of oil resources would prompt the lowest-cost producers to pump the most out of low-cost barrels before the world starts to unwind from too much reliance on oil.

Oil demand growth is expected to slow down in the years to come. BP pegs the cumulative oil demand until 2035 at around 700 billion barrels, "significantly less than recoverable oil in the Middle East alone".

Advertisement

Middle East OPEC production growth would account for all OPEC output growth by 2035, BP reckons, noting that other OPEC production typically has a higher cost base and its market share would drop.

The US liquids production is expected to rise by 4 million bpd to 19 million bpd by 2035, with growth mostly in the first half of the period, driven by tight oil and NGL output.

So, both OPEC's Middle East members and the US are seen increasing oil and liquids production in the next two decades.

  1. Pages:
  2. Page 1
  3. 2
  4. All

This article was first published on OilPrice.com.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

12 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Tsvetana Paraskova writes for OilPrice.com.

Other articles by this Author

All articles by Tsvetana Paraskova

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Article Tools
Comment 12 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy