Non-OPEC oil supply set to outpace OPEC output in medium-term

Non-OPEC liquid supply (including conventional crude, natural gas liquids, biofuels, etc) is expected to grow at a faster pace than that of OPEC between 2017 and 2023, largely because of a sharp rise anticipated in US tight oil supply, according to the latest World Oil Outlook 2018 released by OPEC.

Total non-OPEC supply is expected to grow from 57.5 million barrels per day (mbd) in 2017 to 66.1 mbd in 2023, an increase of 8.6 mbd, or an average annual increment of 1.4 mbd.

“As such, non-OPEC supply exceeds the rise in demand in this period, which averages an annual 1.2 mbd,” the report said, adding that the overwhelming majority of additional oil supply (nearly 80 percent) comes from OECD countries.

The US, according to the report, remains by far the most important source of medium-term supply growth, contributing 5.6 mbd, or two-thirds of new supply, driven by surging tight oil output.

Non-OPEC production in 2017 was assessed at 57.5 mbd, 0.2 mbd higher than projected in the WOO 2017 report.

The increase was driven by faster-than-expected US tight liquids growth, the ‘Declaration of Cooperation’ accelerating the return of stability to the market, a healthy demand outlook, and expectations of supportive oil price.

“For 2018, the short-term assessments, which are in line with the Secretariat’s MOMR, have resulted in total non-OPEC being revised up by a full 1.4 mbd since the publication of the WOO 2017, of which some 1.0 mbd are as a result of higher US supply,” OPEC said.

The long-term picture, however, for non-OPEC supply is a different one, with US tight oil peaking in the late 2020s, and with fewer sources of other growth, maintained the report.

On the other hand, total OPEC supply is expected to marginally decline by -0.2 mbd during the same period -- from 38.9 mbd in 2017 to 38.6 mbd in 2023 -- the report added.

Given strong US and other non-OPEC medium-term supply growth, the implied demand for OPEC crude is estimated to decline from 32.6 mbd in 2017 to 31.6 mbd in 2023.

“Demand for OPEC crude only returns to 2017 levels by the late 2020s, when US tight oil peaks, and rises steadily thereafter. By the end of the forecast period in 2040, demand for OPEC crude is projected to average nearly 40 mbd,” the report said.

The share of OPEC crude in the global oil supply is expected to increase from 34 percent in 2017 to 36 percent by 2040, it added.

Globally, in the medium-term, oil demand is expected to continue growing at healthy rates to reach a level of 104.5 mbd by 2023, while long-term oil demand is set to increase by 14.5 mbd to reach 111.7 mbd in 2040.

India is projected to see the fastest demand growth and the largest additional demand in the period to 2040.

According to the outlook, oil & gas combined are expected to make up more than 50 percent of the global energy mix by 2040.

Driven by demand from transportation and petrochemicals, oil is expected to account for the largest contributor to the global energy demand for the 2015-2040 period.