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Page added on April 13, 2014
IMF: North American boom to keep oil prices low
A dramatic increase in US and Canadian oil production will push oil prices down, according to the International Monetary Fund. The growth in US shale oil and Canadian oil sands is already spilling over to the global marketplace.
A dramatic increase in US and Canadian oil production will push oil prices down, according to the International Monetary Fund. The growth in US shale oil and Canadian oil sands is already spilling over to the global marketplace.
Nearly all of the growth in global oil production is coming from the United States and Canada. Combined, North American production growth is around 1.2 million barrels per day from U.S. shale oil and Canadian oil sands. IMF said this growth was spilling over to the global marketplace.
“Crude oil prices have edged lower, mainly as a result of the continued supply surge in North America,” it said. (Related Article: Russian Sanctions and the Negative Effect on Global Energy Security)
The U.S. Energy Information Administration said in its market report for April it expected the price for Brent crude, the global benchmark, to average $105 per barrel this year, but fall to $101 in 2014. For West Texas Intermediate, the U.S. benchmark, prices should average $96 per barrel. That’s $1 per barrel higher than EIA reported last month, although the administration expects WTI to dip to $90 per barrel next year.
WTI is less than the Brent equivalent because of the increase in production in the United States.
EIA said in its report that a harsh winter season in the Lower 48 states curbed oil production, though a recovery is on its way. Seasonal issues aside, EIA said it expects strong growth in crude oil production from the Bakken, Eagle Ford and Permian shale basins through 2015.
In its short-term report, EIA said U.S. oil production should average 8.4 million bpd in 2014, a 14 percent increase from last year. By next year, U.S. oil production should reach 9.1 million bpd.
WTI was priced at $102.56 per barrel Wednesday, while Brent sold for $107.67. Oil prices this week declined on word export terminals in eastern Libya were set to reopen, ending a long blockade. Prices had rebounded by Wednesday, however, following mixed reactions to EIA’s assessment of crude oil stockpiles. (Related Article: U.S. Shale Means Cheap Coal for British Economy)
EIA said domestic crude oil production should move closer to 13 million bpd as the shale boom continues. For the IMF, this trend suggests global oil prices should continue their steady decline. While crude oil prices increase 0.1 percent this year, they should drop by 6 percent in 2015.
The decline means lower energy prices for U.S. consumers, though global economic factors will continue to influence the North American market. Long-term, EIA said U.S. oil imports should continue to decline through 2036 and approach near zero through 2040.
17 Comments on "IMF: North American boom to keep oil prices low"
Dave Thompson on Sun, 13th Apr 2014 2:17 am
It will be an interesting next few years.
rockman on Sun, 13th Apr 2014 2:28 am
OK…lets see how the actual facts support (or don’t support) the idea that the increase in US oil production has caused the price of oil to decline:
2007 – 5.25 million bopd…$60-80/bbl
2013 – 7.75 million bopd…$95-104/bbl
“A dramatic increase in US and Canadian oil production will push oil prices down.” I gather the operative word is “will” since it ain’t done it yet. LOL. Of course they could use the lame angle that prices would be higher if it weren’t for the increase in US shale production. Lame because we wouldn’t have the higher production today had not prices increased.
I usually like the CSM…they tend to have a good angle on complex matters. Which is why I have to classify this piece as intentional propaganda. I can’t write off the obvious and ridiculous spin due to ignorance.
DC on Sun, 13th Apr 2014 3:32 am
In our Orwellian present, words mean whatever the person saying them wants them to mean. Thus a ‘boom'(+a few %) results in a ‘low prices'(prices go up). In a similar vein, a net importer of fossil-fuels for over 60+ years, is in a position to ‘export’ fuel to(because of the you know, the ‘boom’. to …whoever. 2+2=5 you know….
Meld on Sun, 13th Apr 2014 7:05 am
All these official bodies convincing each other that everything is ok. I think they actually believe it too. Tell a big enough lie enough times and it becomes true, at least in the brain of the thoughtful ape. Makes me chuckle.
Arthur on Sun, 13th Apr 2014 10:16 am
While not very deep in Christianity, to put it mildly, I like the CSM as well, not in the least because they don’t take all the bs from Washington at face value.
I know that it is bon ton here to expect that everything related to fossil fuel is going to unravel tomorrow or the day after tomorrow at the latest, but I would not be too sure about that. Prices could indeed be ‘low’ next year, like 90$, not in the least because of an ongoing process of demand destruction, as a result of people adapting their patterns of behavior, now that they realize that high fossil prices are here to stay. Young people start to question the car, but not the latest much cheaper ‘iCrap’, that to some extent can replace the car.
Davy, Hermann, MO on Sun, 13th Apr 2014 12:33 pm
Arthur, the real demand destruction will be contingent upon what happens with China’s debt unwind spiral. If China has a hard landing and sputters out with 5% growth or less oil demand will decrease significantly.
westexas on Sun, 13th Apr 2014 1:22 pm
Western Hemisphere net oil exports* fell from 5.9 mbpd in 2004 to 5.0 mbpd in 2012, and combined net exports from Canada + Mexico fell from 2.6 mbpd in 2004 to 2.2 mbpd in 2012.
*Top seven net oil exporters in the Americas in 2004, Canada, Mexico, Venezuela, Argentina, Colombia, Ecuador, Trinidad & Tobago (total petroleum liquids + other liquids, EIA)
shortonoil on Sun, 13th Apr 2014 2:38 pm
We have posted this here before, but it is worth re-posting. We expect a major change in the dynamics of the shale industry over the next few years.
The Duvernay Shale play is a huge, rich gas, condensate reservoir in Western Alberta. It is estimated to be 30% larger than the Eagle Ford, with 433 tcf of NG, and 61.7 Gb of liquids. Money from Australia, China, and over 22 oil companies is now pouring into it. These include heavy hitters like ConocoPhillips, Shell, Chevron, and Encana. Well depth is 16,000 ft.
Interest in the Duvernay has increased because of its close proximity to the bitumen fields around Fort McMurray. Condensate, because it has a very limited capacity to produce transportation fuels (about 7%) has a limited market. The market that pays the best price is as a diluent to produce dilbit, which allows the extra heavy bitumen to be transported by pipe. Over half of the condensate used for making dilbit now comes from the Eagle Ford, which is 2000 miles away. The Duvernay is 200 miles away, and the transportation saving will amount to $15 – $20/barrel.
The Durvernay will obviously be able to supply the tar sands with diluent for as long as they remain operational, and very competitively with any present US supply. But, how will this affect US shale development, that has been able to buzz along because it held a captive market in Canada? Also, what will the Durvernay producers do with 433 tcf of NG that has to come along with the condensate? 433 tcf of NG is enough to supply the entire US market for 16.5 years.
The gas will be shipped, and it will be shipped south. There is nothing to prevent a flood of Canadian NG from arriving at, and dominating the US market.
[quote]”Encana CEO Randy Eresman admitted as much at the company’s annual meeting in Calgary last week when he suggested the company could give away the gas and still make money on the liquids.”[/quote]
The US shale industry is likely to be looking at a serious hit over the next few years!
Unless the export ban on “condensate” can be overturned there won’t be any increase in shale production over the next few years. The market for it has hit its limit in the Northern Hemisphere.
http://www.thehillsgroup.org/
Davey on Sun, 13th Apr 2014 3:30 pm
Thanks short. Great update!
rockman on Sun, 13th Apr 2014 4:46 pm
“Unless the export ban on “condensate” can be overturned there won’t be any increase in shale production over the next few years. The market for it has hit its limit in the Northern Hemisphere.” And where there’s a buck to be made the oil patch will figure a way to get around the oil export ban. An easy solution: export EFS refined products and not EFS oil. There have been small units designed to convert EFS oil to exportable EFS “products”. With increased production large scale upgraders are in the works. Given the improved economics a lot (if not most) of future EFS production could be heading overseas soon. From https://rbnenergy.com/whole-lotta-splittin-going-on-gulf-coast-condensate-splitter-economics
Midstream companies are building or planning 400 Mb/d of new condensate splitter capacity to process Eagle Ford production by 2016. BASF/Total have been operating a 75 Mb/d splitter at Port Arthur since 2000. The new splitters are being built in response to a flood of condensate range material coming out of the Eagle Ford into Houston and Corpus Christi.
Increasing volumes of condensate production not only in the South Texas Eagle Ford basin but in the Utica in Ohio and the West Texas Permian Basin are hard for existing refineries to handle especially in the Gulf Coast. That is because condensates contain too many light naphtha range materials that can overwhelm most Gulf Coast refineries that are designed to process heavier crudes. To get around this constraint several US refiners – most notably Valero and Marathon Petroleum Company are building new refinery units designed to pre-process condensates to produce feedstocks for gasoline blending and for upgrading units that produce diesel and jet kerosene. These refinery condensate processes are variously called topping units or splitters but they are operated as part of the overall refinery configuration and used to increase the output of finished refined products.
One big factor in favor of condensate splitter economics is the low cost of purchasing condensate compared to regular crude oil. That discount – which producers have to swallow when selling their condensate is primarily caused by two factors. The first that US refineries are not typically configured to process condensate range materials so demand is low even as supplies are surging – putting downward pressure on prices. The second factor is the US ban on exports of field condensates that effectively restricts the market for condensates to the US and Canada. Although there is some demand for field condensate in Canada it is not enough to soak up the US surplus. The net result is that US field condensate can be discounted by as much as $15-20/Bbl.
Boat on Sun, 13th Apr 2014 5:03 pm
So the million dollar question. Why doesn’t Canada build their own refineries and pipelines to ship to the world? Sounds like they have everything they need to supply competitive finished goods and products. Does the weather play that big a role for the US systems to be so needed and attractive or what is the reasoning.
J-Gav on Sun, 13th Apr 2014 5:15 pm
Things are definitely looking up for natgas and condensate supply these days, at least as far as North America is concerned. Oil is kind of a different animal though. Pipeline attacks, non-North American/non-OPEC depletion rates, geopolitical turmoil or outright conflict make even mid-term price predictions considerably more iffy.
However, if “all goes well,” there’s more than enough of the stuff left to fry our asses good before the end of the century unless some form of economic collapse intervenes to destroy demand.
GregT on Sun, 13th Apr 2014 6:44 pm
Many gas stations in the lower mainland of Vancouver BC, are reporting gas prices today matching the all time record high of $1.499, reached in 2008. One gas station is reporting $1.519. Prices continue to trend upwards.
rockman on Sun, 13th Apr 2014 8:13 pm
Boat – Here’s one opinion why Canadian refinery expansion. From: http://business.financialpost.com/2014/01/17/opinion-why-building-new-refineries-in-canada-is-uneconomic-and-undesirable/?__lsa=53e1-d186
“Notionally it is nice to think that in the absence of pipelines that industry would invest the tens of billions necessary to refine all our production at home. That may appeal to some as good politics but it is economically naive and just plain bad business. Moreover it undermines our geographic competitive advantage.”
Davy, Hermann, MO on Mon, 14th Apr 2014 11:38 am
MELD SAID – All these official bodies convincing each other that everything is ok. I think they actually believe it too. Tell a big enough lie enough times and it becomes true, at least in the brain of the thoughtful ape. Makes me chuckle
Meld we know through psychology the overt demonstration of cognitive dissonance. If these folks were not nervous there would be little response to all the dangerous issues for status quo BAU like AGW, PO, food stress, water stress, pollution, and over population. The amount of official bodies trying to explain away reality make reality more apparent. I love how almost every official body uses their “Excel Goal Seek” to forecast the exponential or linear rise in some issues then goal seek the solution. None of them just say this will not work. For example reality or common sense would say we can’t raise wheat yields by 50% or population can go to 10BIL. These outcomes are most likely not possible so when they forecast these things they are in effect telling us they are not possible. Unconsciously they are painting a picture of a bottleneck.
Boat on Mon, 14th Apr 2014 12:27 pm
Rock
Canada has a geographical advantage in servicing the Asian markets of Japan, Korea and China …..then he contradicts himself….That may appeal to some as good politics but it is economically naive and just plain bad business. Moreover it undermines our geographic competitive advantage.
Who would make the financial investment necessary to build new refineries in Canada knowing that the excess capacity existing in the U.S. enjoys a capital and geographic advantage for exporting refined products?
But he had just stated that the US exports to ….Gulf Coast refiners enjoy a geographical advantage of being close to the export markets for refined petroleum products. These are located in Latin America, the Caribbean and North Africa
The only tangible thing the article seems to say is building an existing refinery is 4x more expensive than expanding older ones.
The Asian countries are huge importers of all varieties of oil products. With the huge amounts of oil and nat gas in Canada they should quit looking south and develop their own ability to export.
Kenz300 on Mon, 14th Apr 2014 1:56 pm
Demand for oil continues to grow in China and India….. this growing demand will out pace any increase in supply or demand reduction by the US and Europe.
The price of oil, coal and nuclear keeps rising and causing environmental damage…..
The price of alternatives like wind, solar and second generation biofuels keeps dropping……