OPEC’s global market share sets to jump to 50%, as US oil producers lament over shale’s post-Covid slow growth

Oredola Adeola

Oil producers in the United States and industry expert have projected that the Organization of the Petroleum Exporting Countries (OPEC) and its allies will continue to bestride the bloated oil market for many years, as U.S. shale production keep showing slow growth amidst lower well production and output hold back.

EnergyDay gathered that the post-Covid production reality in the United States is quite different compared with late 2019 and early 2020 when the U.S. shale output reached record levels.

OPEC in its Monthly Oil Market Report (MOMR) for February 2023, anticipated global oil demand to rise by 2.3 million bpd this year and has revised the demand for its crude in 2023 up by 0.2 mb/d from the previous assessment to stand at 29.4 mb/d, which is 0.8 mb/d higher than in 2022.

The oil cartel has however expressed cautiously optimistic about China’s oil demand in 2023, expecting consumption growth of between 500,000 barrels per day (bpd) and 600,000 bpd in 2023 compared to 2022.

Nigeria has been showing impressive recovery among the OPEC member nations as its average crude oil output in February 2023 increased with the production of 1,306,304.3 million barrels per day (bpd) based on data from Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

Mele Kyari, Group Chief Executive Officer of Nigerian National Petroleum Company Limited (NNPCL) at a webinar that was reported by S&P Global Commodity Insights in January, revealed Nigeria’s plan to hit a production target of 1.8 million barrels per day in 2023.

Nigeria’s output rise is credited to the return of key grades Forcados and Brass River, and the success achieved with the intense clampdown on oil thieves and vandals.

Meanwhile, US industry experts projected that OPEC’s market share will jump from around 30% now to close to 50% in the future, in which additional supply comes from OPEC and U.S. shale growth plateaus.

They noted that U.S. shale production is recovering but at a very slow pace.

The experts noted that OPEC’s market share and clout over global oil supply will continue to rise, while its market dominance will be unchallenged in years to come.

According to some industry executives, the days of exponential growth in U.S. oil supply from before the pandemic are over, as capital discipline, returns to shareholders, supply-chain bottlenecks, cost inflation, and lower well production combine to hold back production increases.

The Energy Information Administration in a statement seen by EnergyDay on Monday said U.S. shale crude oil production in the seven biggest shale basins is expected to rise in April to its highest since December 2019.

EIA data revealed that Shale production is expected to rise by 68,000 barrels per day – the slimmest rise since December 2022 – to 9.21 million bpd.

EIA noted in its latest Short-Term Energy Outlook (STEO) noted that U.S. crude oil production would rise from 11.88 million barrels per day (bpd) in 2022 to 12.44 million bpd this year.

The expected growth of 560,000 bpd year over year is half the pre-pandemic growth pace. For several years, U.S. oil production rose by more than 1 million bpd every year to 2019.

The outlook also estimated that the growth is set to further slow in 2024, with production seen to average 12.63 million bpd next year. This according to EIA is less than 200,000-bpd growth from the estimated average level for 2023.

Ryan Lance, Chief Executive Officer of ConocoPhillips, American multinational corporation engaged in hydrocarbon exploration and production, at the CERAWeek lamented that the world is going back to what it used to be in the ‘70s and the ‘80s unless industry players do something to change that trajectory.

Scott Sheffield, CEO, of Pioneer Natural Resources, America’s largest pure-play shale producer, told Financial Times on the sidelines of CERAWeek that Saudi, United Arab Emirates, Kuwait, are the three major countries that will be in charge of the market dominance for the next 25 years, as a result of their plan to raise output level this decade.

Sheffield argued that the shale model definitely is no longer a swing producer, insisting that the top three OPEC nations are set to meet a growing share of global oil demand now that U.S. shale cannot and does not want to respond with higher production.

OPEC Secretary General Haitham Al Ghais in a recent statement at the CERAWeek energy conference in Houston- which aligned with the fear of the American oil producers – said that the biggest OPEC and its allies are investing to boost capacity, but production elsewhere is either shrinking or stalled, while investment in supply has been underwhelming for years.

He said, “Increasing capacity and supply is “a global responsibility that OPEC cannot shoulder on [its] own.

Al Ghais in his address to top U.S. shale executives, while discussing global oil supply and the tight global spare capacity, warned that investment in oil and gas needs to rise significantly if the world wants to avoid sleepwalking into a supply crisis.