Crude Production Growth to Slow, Could Open Up To A Future Of Stable Price

Non-OPEC liquids growth potential of 5.5 MMb/p over the next five years has been reduced by over 2 MMb/d to 3.3 MMb/d, according to forecasts by energy analysts Rystad Energy.

The Norwegian firm’s research shows investments in oil and gas production are estimated to drop 20% in 2015, compared to 2014. Outside OPEC, US$200 billion in yearly capex is considered to be axed over a two-year period.

“Ultimately, for every billion dollars being cut in development capex on marginal projects, the production shortfall would amount to 10,000 b/d, says Rystad. “Only US production has been visibly impacted, with the trend turning from 20% annual growth during Q1 to a flat trend in Q2. The shortfall of global offshore production may be steeper if oil prices stay low throughout the year.”

“In the longer run, anything below $90/bbl is not sustainable, due to this steep but delayed supply response and increasing global base declines, while the cost of new production will remain high,” says Rystad Energy’s oil trade analyst Nadia A. Martin.

The upside to this is that most companies would be forced to slow down on growth and as such drop supply. With the recent gradual climb in demand, this could aid the slow recovery of the crude oil price and at best set it at a stable region. We know that a $90/barrel price might not be feasible in any near future but with the drop in investments and companies looking inwards for ways to innovate and derive cost management modules of running their operations we could be left with a system that "automatically" heals itself.

Definitely there's a whole lot of other factors to consider here but for a fact if the non-OPEC countries pull together their resources and abide by even a fragile network to loading the market with their crude oil then we can start to see appreciable changes in the oil price. A switch from the "Call to OPEC" to "Call to Everyone".