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Opec expects further squeeze on US tight oil in 2017

12 Oct 2016 11:55 (+01:00 GMT)
Opec expects further squeeze on US tight oil in 2017

London, 12 October (Argus) — Opec expects US tight oil production to shrink by 289,000 b/d next year, after falling by 607,000 b/d this year, despite higher prices and despite revising its forecast for overall non-Opec production next year slightly upwards. Non-Opec production growth is seen centred in developing countries and the FSU.

The latest Monthly Oil Market Report (MOMR) takes no account of and makes no comment on the tentative production restraint agreed by Opec ministers in Algiers last month but yet to be detailed. It holds forecast 2017 demand growth unchanged at 1.15mn b/d, to average 95.56mn b/d. This year's demand growth forecast inches up by 10,000 b/d and stands at 1.24mn b/d.

Next year's non-Opec supply growth has been lifted by 40,000 b/d to 240,000 b/d while this year's has been revised down by a more substantial 70,000 b/d, largely on baseline changes, giving a contraction of 680,000 b/d.

Call on Opec crude for next year is put at 32.6mn b/d, an increase of 100,000 b/d on last month's forecast. For 2016, the call is put at 31.8mn b/d, also an increase of 100,000 b/d. The outlook for next year is towards the bottom end of the 32.5mn-33mn b/d range the Algiers gathering agreed to use as a basis for further discussion.

According to Argus estimates, Opec produced 33.66mn b/d in September. Incomplete data submitted to the Opec secretariat by member countries suggest a rise in members' output in September compared with August. Substituting Argus numbers for those missing from Gabon, Libya, Indonesia and Iran, none of which are likely to have changed dramatically in September, declared output came to 34.27mn b/d, against 34.18mn b/d in August.

In 2017, Opec expects non-Opec production to rise by 250,000 b/d in Brazil, 220,000 b/d in Kazakhstan, and 170,000 b/d in Canada. Incremental Russia production forecasts have been increased by several tens of thousands of barrels a day because of new field developments. Mexico, the US, China, Colombia and Azerbaijan will show declines.

The MOMR expects US producers to begin to ratchet up spending in 2017 on the back of stronger prices. But crude production is still seen falling by around 230,000 b/d from a forecast 8.87mn b/d this year as a rise in production of 150,000 b/d in the Gulf of Mexico is overwhelmed by a fall of 289,000 b/d in tight crude and 90,000 b/d in other crudes.

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