US supply shock to lift non-Opec oil output 1.9%: IEA

London: Crude from outside the Organization of Petroleum Exporting Countries (Opec) will increase by 990,000 barrels a day annually to 2018 as US tight oil output continues to boom, according to the International Energy Agency.

add_main_imageNon-Opec supplies are forecast to grow to 59.3 million barrels a day in 2018 from 53.3 million last year, or 1.9% a year, the Paris-based energy adviser said in its medium-term oil market report on Tuesday. The US will add 2.8 million in liquids production, accounting for nearly half of the growth and 420,000 barrels a day more than in the IEA’s estimate in October.

“North America has set off a supply shock that is sending ripples throughout the world,” IEA executive director Maria van der Hoeven said in a press release accompanying the report. “The good news is that this is helping to ease a market that was relatively tight for several years.”NextMAds

The tight oil boom in the US unleashed by hydraulic fracturing, or fracking, boosted output last year to the highest level since 1995 and could help make the world’s largest oil consumer energy independent by 2020. New North American supply will hurt growth in Opec’s production capacity and could slow global megaprojects as investment tilts toward the US, the IEA said.

Opec spare crude oil production capacity will surge 25% in the next two years as rising US shale output crimps demand for the group’s supplies, the International Energy Agency (IEA) said.

Opec is forecast to increase its implied spare output capacity to a peak at 7.18 million barrels a day in 2015 versus 5.76 million this year, the IEA said on Tuesday in its medium-term oil market report. The figure is calculated by subtracting the anticipated demand for Opec crude from the group’s total production capacity.

The organization’s 12 members are facing headwinds from the shale oil and gas boom in North America, which may supplant some Opec supplies, IEA said.

The US pumped crude at a 21-year high of 7.37 million barrels a day in the week to 3 May, according to data from the Energy Department.

The gains are driven by a boost in output from shale deposits, which may propel the US to become the world’s top producer by 2020, displacing Saudi Arabia, according to IEA.sixthMAds

The shale revolution comes at a time when Opec nations may struggle to increase production because of maturing fields and security issues, the energy adviser said.

Escalating security risks, political instability and unattractive fiscal regimes in a number of Opec member countries are expected to take a toll on Opec production capacity growth, the IEA said.

Saudi Arabia, the group’s largest producer, will continue to hold the largest share of spare capacity amid planned expansion for oil fields including Khurais, Shaybah and Manifa, the agency said.

Mature production

The desert kingdom will increase output by a net 380,000 barrels a day to 12.35 million by 2018, with new capacity largely offsetting mature production as Saudi Arabian Oil Co. plans to rest some old workhorse fields until new technology improves extraction and recovery rates, IEA said.

The agency dropped its medium-term estimate for so-called effective spare capacity, which measures the amount of production that can be brought online in 30 days and maintained for 90 days. IEA will retain its monthly estimate of this, which takes into account supplies from Iraq and Nigeria that are not immediately available to the market for technical, security-related or infrastructure reasons.

Opec’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. They will meet on 31 May in Vienna to discuss production policy after keeping their collective target at 30 million barrels a day in December.

Global refining capacity will increase 9.8% by 2018 aided by projects in Asia and the Middle East, while European plants are at high risk of closing, according to IEA.

Crude distillation will rise by 9.5 million barrels a day in six years reaching 106.7 million by the end of 2018. Asia will account for about 60% of the gain and the Middle East 22%, the IEA said.

Natural gas will increase its share of road transport fuels to 2.5% in 2018 from 1.4% in 2010 as consumers look for cheaper, cleaner forms of propulsion, according to IEA.

Further displacement of oil as the leading transport fuel is being held back by the need for substantial infrastructure, IEA said. Oil will account for 96.4% of road-transport fuel in 2018 from 97.8% in 2010, IEA said. BLOOMBERG

Konstantin Rozhnov and Matthew Brown contributed to this story.