Global oil supply remains a concern amid OPEC and Russian-led output reductions, with production falling from mature oilfields while demand growth remains strong, the International Energy Agency’s Executive Director Fatih Birol said on April 11.
This was despite forecasts of rising oil output from non-OPEC producers, led by the United States, which is expected to be able to meet two-third of global oil demand growth over the next five years, he said.
The “growth in the United States alone is not enough to make me feel comfortable that there will be enough production in the future because of two reasons,” Birol said on the sidelines of the International Energy Forum.
First, global oil consumption is still growing strongly, gaining 1.5 million barrels per day (bpd) this year, driven by petrochemical, industrial and aviation demand, he said.
Second, some older, maturing fields are in decline.
“Every year we’re losing (the equivalent of) North Sea production, which is 3 million barrels per day,” he said.Investments in oil and gas exploration remain low, Birol also said, even though global oil prices have returned to 2014 levels.
“Our expectation for 2018 investment is only 40 percent of what we’ve seen in 2014 before prices collapsed,” Birol said.
While efforts by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to cut output has helped drain excess global supplies, the industry remains wary that growing U.S. shale oil production could cap price gains.
Another big worry was the halving of Venezuelan oil production since former President Hugo Chavez took office in 1999, Birol said.
“We are very worried about Venezuela. As of today, Venezuela’s crude production is half of that when Mr Chavez took office at the end of 1999,” he said.
The drop is one of the largest in the “history of oil”, Birol said, adding that the country’s production is expected to decline even further, although it was hard to tell how deep the cuts would go.
At the IEF, India’s Energy Minister Dharmendra Pradhan called for “reasonable” oil prices after Brent rose above $71 to hit its highest since late 2014 on Tuesday. India is the world’s third largest oil importer.
Birol said: “It’s important for the global economy that we don’t see a price spike. Last year we have seen a very strong, spectacular growth in the gas markets, but this is mainly a result of gas prices being on the low side.”
Oil and gas producers should be wary of price spikes because it will lead buyers to find alternatives such as coal and renewables, Birol said.