Thanks to the shale boom, the U.S. is set to boost oil and gas production to unprecedented levels by 2025, but OPEC will take back market power longer term, the International Energy Agency said Tuesday.
[ibd-display-video id=2642056 width=50 float=left autostart=true]The Paris-based energy watchdog estimated in its annual World Energy Outlook report that domestic output would jump 25% – to 30 million barrels of oil equivalent per day from 24 million currently. The U.S. had already topped Russia in 2011 to be the world’s No. 1 oil and gas producer, but the IEA’s forecast would put the U.S. head and shoulders ahead of any rivals.
“A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50% higher than any other country has ever managed,” according to the report.
Oil prices fell Tuesday, after the IEA cut its 2017 and 2018 oil demand forecast by 100,000 barrels per day, in the agency’s monthly report. Brent fell 1.1% to $62.45 per barrel. U.S. crude was also off 1.1%, to $56.15.
Shares of Exxon Mobil ( XOM ) were down 0.6% on the stock market today , Chevron ( CVX ) lost 0.3%, BP ( BP ) eased by 0.6%, and Royal Dutch Shell (RDSA) dipped 0.1%.
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Thanks to advances by shale producers like EOG Resources ( EOG ), Pioneer Natural Resources ( PXD ), Continental Resources (CLR) and Diamondback Energy (FANG), U.S. shale oil production is expected to grow by 8 million barrels per day from 2010 to 2025, exceeding the growth that Saudi Arabia saw from the 1960s to the 1980s.
The IEA estimates that this boom will account for 80% of the growth in the world’s oil supply by 2025 and will allow the U.S. to become a net oil exporter by the late 2020s.
U.S. shale exploration and production companies weathered a global, two-year industry glut by tightening belts, cutting costs and adopting novel technological advances aimed at increasing production and lowering break-even costs.
But shale production should start to decline starting in the middle of next decade, the IEA added, as a slower pace of investment weighs on longer-term output. That should let OPEC boost its market share to 46% by 2040 from about 43% today.
Still, there are many other factors at play over the long term. The IEA noted the U.S. shale sector’s history of beating expectations; the shift to electric vehicles putting downward pressure on oil demand; and changes in estimates of recoverable shale reserves.
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