The United States and Iran will lead the gains in new oil production in the next five years, despite the current drops in production due to the global oil supply glut, the International Energy Agency said Monday.
The new projections by the international agency show gains in production between 2016 and 2021 as a direct result of oil prices rising in 2017, as oversupply in the market rebalances with demand.
“While U.S. light, tight oil output is falling steeply for now, the market will begin rebalancing in 2017 – and by 2021 the United States and Iran are seen leading production gains among non-OPEC and OPEC countries, respectively,” the report said.
U.S. shale oil production from hydraulic fracturing, or fracking, has made the nation a leading oil producer, resulting in a significant reduction in U.S. imports of crude oil in recent years. But excess oil on the market, as a result of dropping U.S. and Asian demand, has resulted in oil prices falling to a seven-year low. As a result, U.S. producers have ratcheted back production, shutting down drilling rigs and laying off tens of thousands of workers over the last six months.
The Energy Information Administration, the analysis arm of the Energy Department, projects U.S. production to continue to fall through 2017, according to its February short-term outlook. U.S. crude oil production averaged an estimated 9.4 million barrels a day in 2015, which will fall to an average 8.7 million barrels a day in 2016 and 8.5 million barrels a day in 2017, according to the outlook.
The International Energy Agency, however, projects U.S. production to turn around in the next five years, Monday’s report shows.
“The United States remains the largest contributor to supply growth during the forecast period, accounting for more than two-thirds of the net non-OPEC increase,” it adds. “Freed from sanctions, Iran leads OPEC gains: Iranian oil output rises 1 [million barrels per day] to 3.9 mb/d by 2021.”
Demand for oil will shift from China to India during the forecast period, the agency reports. “Indian consumption races ahead as more motorists take to the roads, while Chinese demand growth cools in tandem with the economy.”
The report was released at a major energy conference called CERA Week hosted by global research consultants IHS CERA in Houston. International Energy Agency Director Fatih Birol warned consumers not to become complacent in a market dominated by low fuel prices.
“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant-future,” Birol said Monday.
The Energy Department says low gasoline prices should persist through 2017, with the average price of gasoline seeing a slight bump beginning next year. That matches with the international agency’s forecast that oil prices will rebalance in 2017.
