It seems that the world’s largest oil producing cartel has finally realised the threat it faces from the US shale bonanza. In its latest World Oil Outlook, Organization of the Petroleum Exporting Countries (OPEC) has apparently acknowledged that the fracturing technology could sharply chisel the demand for the group’s own oil.
The impact of North American shale boom is the highlight of the annual study. Recall that in its annual oil outlook two years ago, the group paid no heed to the fast developing US shale, categorising it only a ‘marginal’ addition to the global supply.
But the latest oil outlook sets a more cautious tone, where it predicts that the new oil supply from North America and Canada could touch 4.9 million barrels per day by 2018 compared to 1.7 million barrels per day predicted for the same in 2012. As a result, OPEC has lowered its supply forecast for 2018 by one million barrel per day from that of last year, particularly due to changes in the global oil trade scenario this year.
Besides Canada and North America, additions to tight oil resources from other non-OPEC countries like Russia and China could also weigh down demand for OPEC oil worldwide. Also, the changing oil landscape is giving chills to OPEC members like Algeria and Nigeria as they see one of their largest export markets, United Sates slipping from their control.
OPEC still iterates on no significance difference to its oil supply in the longer run. Despite the fears about potential environmental and cost barriers that might hinder the growth in shale supply, the growth in demand seems to outweigh them. The crude oil prices are expected to be steady in the long run, and with higher non-OPEC supply joining the oil trade, the group might just have to restrict its supply to keep prices at satisfactory levels.