By Jamie Barrie T he latest forecasts from the U.S. Energy Information Administration suggest that their agreements to boost prices and hasten the rebalancing of oil supply and demand by cutting output may bring much needed life to the U.S. shale industry. The EIA’s monthly report that recently went public raised its forecast of global oil demand growth for 2017 from 1.56 million barrels a day to 1.63 million barrels, which is good news for producers. At the same time, though, the EIA boosted its outlook for U.S. oil production. The good news for U.S. oil producers will get a different reaction from The Organization of the Petroleum Exporting Countries (OPEC) as recent weekly EIA data showed a 176,000 barrel-a-day jump in U.S. production from the previous week, the biggest increase since May 2015. A large part of that increase came from a revision of fourth-quarter output figures, with U.S. production raised by 100,000 barrels a day from the previous estimate.
TheEIAnowseesU.S. production reaching9.22millionbarrels a day by December, an increase of 320,000 barrels over the year. But this could quickly start to look like a conservative forecast. The incoming U.S. president and Congress may turn out to be more supportive of oil extraction than the outgoing ones, after Donald Trump said in September that he would “lift the restrictions on American energy and allow this wealth to pour into our communities.” This could give the shale sector a further boost. With U.S. oil production growing again, it means that shale production will increase as the price starts moving towards the $55 a barrel mark, making shale production more economically feasible. However the extra boost to the U.S. shale oil industry will rest in the hands of OPEC members comply with agreed on production rates. Industry experts are saying that OPEC is already talking of extending the time frame for its output cuts and may even look to increase them which would be more positive news for the U.S. and Canadian shale oil industries.
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SPOTLIGHT ON BUSINESS MAGAZINE • FEBRUARY 2017
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