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There is no doubt that the American oil shale oil boom over the last decade has had a significant impact on global oil markets. The increase in oil production in the United States has broken, at least temporarily, control of the price of oil by OPEC.
The Permian Basin is responsible for the largest gains in oil production in the United States in recent years. In the last eight years, there has been phenomenal growth in production in the Permian. Between August 2011 and today, oil production in the Permian basin quadrupled, exceeding 4 million barrels a day earlier this year:
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Production of oil in the Permian basin.
But recently, a number of reports have highlighted a slowdown in the growth of American shale oil. In its latest report on drilling productivity, each of the six regions monitored by the Energy Information Administration (EIA) – Anadarko, Appalachian, Bakken, Eagle Ford, Haynesville, Niobrara and Permian – still showed an annual increase in oil production prices. Related: Why Middle East tankers should not hire mercenaries
However, looking at year-over-year gains in recent years, there is a noticeable slowdown in oil production growth. This slowdown is particularly pronounced in the Permian Basin. According to the most recent estimates of the Permian, production from one year to the next increases today by just over half compared to that of last year. . Output growth in this country has been declining rapidly since the peak of a year ago.
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Growth of oil production in the Permian Basin from one year to the next.
If this trend continues, OPEC's strategy of maintaining production cuts should ultimately bear fruit. While shale oil production in the United States is slowing and decreasing inevitably, OPEC is poised to regain market share.
The generic nature of this scenario is the growth in global demand, which the International Energy Agency (IEA) recently revised downward for 2019 to 1.1 million BPD. A year ago, the IEA had forecast demand growth in 2019 of 1.5 million barrels before reducing it to 1.2 million barrels due to slower growth from from China.
OPEC is certainly keeping a close watch on global demand and US production figures. At one point, both will fall, and the one that will fall first will probably dictate oil prices in the near future.
The EIS predicts that American shale oil will continue to grow for most of the next decade. If it slows down earlier, as world demand continues to grow to more than one million barrels of gross tonnage, we will see a return of rising oil prices.
By Robert Rapier
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