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Production forecasts: falling, not freezing

Welcome to our in-depth report on production forecasts

IF OIL prices remain around $30 a barrel, output from the world’s major producers will fall by 150,000 barrels a day by mid-2016 and by 0.583m b/d by the year’s end, according to Petroleum Economist’s special report this month. The US will suffer the steepest losses, followed by Russia, Asia, Latin America and the North Sea. Rising Middle Eastern production – chiefly from Iran and a bit from Iraq – and West Africa will temper the losses.

These declines should offer glimmers of hope for a price revival. In tandem with a forecast rise in consumption of 1.2m b/d this year, supply and demand should come back into balance in the second half of 2016. Stocks would start to draw down.

But strong price rises later in 2016 – prompted either by natural supply-demand equilibrium or Opec cuts – could be self-defeating. Our report shows that the bulk of output losses this year will come from the US’ highly price-reactive fracking regions. Tight oil is the world’s new swing supplier. While the downturn is telling us at what price its output starts to drop, an upturn will answer an equally critical question for the industry: what is the new price tight oil needs to swing higher again?

For more from Petroleum Economist's in-depth report on global production forecasts click on the links below.

US: nearing the cliff edge Canada defying the gloom
Flatlining in the FSU Middle East: liquid, not solid
Latin American output heading south Asia past its peak
West Africa on the up The storm nears in the North Sea

 

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