US shale boom confirmed despite falling oil prices

November 17, 2014

Underestimation of future oil supply from North America may have large implications for global markets and policy makers. Opinions differ between leading government agencies and independent data providers. Rystad Energy reaffirms its medium-term outlook for North American (NAm) shale oil output of ~8 MMbbld in 2020, or ~12 MMbbld when including NGL. These NAm shale numbers for 2020 are 2-4 MMbbld higher than most other industry forecasts. Rystad Energy also differs from leading agencies in their supply projections for other large producing regions such as Russia, Kazakhstan, Mexico, non-OPEC Africa and OECD Europe.

However, Rystad Energy’s view on forward-looking oil market imbalances does not differ too much from other agencies.  “Our call-on-OPEC crude, for example, bottoms at 28.3 MMbbld in 2017 before rising towards the 2014-levels in 2020,“ says Bjornar Tonhaugen, VP Oil and Gas Markets. “We share the view that the oil market is structurally over-supplied in at least the coming three years, barring any major and lasting supply disruptions.”

The composition of medium term oil supply differs widely between Rystad Energy and prevailing industry references. “If we are right on NAm shale, as we have been until now, and simultaneously underestimate supply growth outside of the US, the oil market would become even more over-supplied towards 2020 than we currently believe,” says Tonhaugen. “The oil market cannot rely solely on OPEC decisions to rebalance in the medium term. In addition, we will see reduced supply growth from many sources as marginal activities become unprofitable across the board, which again lays the foundation for the next up-cycle down the road.”