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World Oil Supply

OPEC Monthly Oil Market Report – October 2017

45

Non-OPEC oil supply highlights in 2018

Non-OPEC production is expected to increase next year, primarily as a result of projects that were approved

before the 2014 price collapse. When the WTI price remained below $50/b for a longer period, US production

growth slowed as the oil rig count declined. Lower prices are beginning to weigh on US shale oil activity as

concerns mount that aggressive development could lead to output declines. Oil prices are expected to

remain at $50-55/b in the next year. A rise above that level would encourage US oil producers to expand

their drilling activities, otherwise the lower prices could lead to a reduction in their Capex.

According to recent information, key shale oil producers are basing their plans on a price of $50-55/b.

Leading companies such as Chesapeake and Pioneer have said that they are making investment decisions

based on prices staying around $50/b. Nevertheless, other more structural factors have played a role. These

include flat-to-lower oil well productivity in key regions since last year, particularly in the Permian and Eagle

Ford.

Moreover, a drop of about 20% in drilling efficiency since 3Q16, increased service costs (10% higher y-t-d)

and production costs - due in part to the use of heavier proppant and higher frack stages - are the main

challenges that US producers are facing and are likely to continue to weigh on supply growth momentum in

the coming year. This accounts for the recent downward revisions for US and non-OPEC supply for the

current year, by major institutions and sources. The supply forecast for next year will be revised downward if

higher oil prices and lower costs do not materialize.

Non-OPEC supply in 2018 is expected to grow by 0.94 mb/d, following a downward revision of 0.06 mb/d in

this month’s assessment, to average 58.64 mb/d. This is mainly due to the lower supply level of Russia

which was revised down for next year’s forecast and is now expected to decline by 0.01 mb/d to average

11.03 mb/d in 2018. The US, Brazil, Canada, the UK, Australia, Kazakhstan, Ghana and India are expected

to be the key countries driving growth next year, in contrast to China, Mexico, Colombia, Azerbaijan and

Oman, which are expected to see a further decline in oil supply.

Graph 5 - 4: Non-OPEC liquids supply quarterly

forecast, 2016-2018

Graph 5 - 5: Non-OPEC oil supply, 2016-2018

Graph 5 - 5

highlights actual non-OPEC quarterly oil supply in 2016 and the forecast for 2017 and 2018. The

quarterly distribution for non-OPEC supply in 2017 indicates the regular seasonal pattern due to

maintenance work, particularly in offshore areas, but with higher production levels compared to the same

quarters in 2016. It is forecast that 4Q17 will be the highest quarter at 58.28 mb/d for oil supply compared to

other quarters. For 2018, due to the increase in US shale production, higher growth is expected, as well as a

higher quarterly distribution throughout the year.

156

1,048

814

687

695

1,186

1,033

854

0

200

400

600

800

1,000

1,200

1,400

55,000

56,000

57,000

58,000

59,000

60,000

1Q 2Q 3Q 4Q

2017/16 (RHS)

2018/17 (RHS)

2016

2017*

2018*

Note: * 2017 and 2018 = Forecast.

Source: OPEC Secretariat.

Y-o-y change (tb/d)

Production (tb/d)

57.71

56.24

56.53

57.59

57.87

57.29

57.34

58.28

58.56

58.48

58.38

59.13

54

55

56

57

58

59

60

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2016

2017

(Forecast)

2018

(Forecast)

mb/d

Source: OPEC Secretariat.