Rystad Energy expects U.S. shale oil output to grow by 100,000
barrels per day (bpd) each month for the rest of this year and
into 2018 if oil prices hold around $50-$55 a barrel, well above
estimates by the U.S. Energy Information Administration for
monthly gains of about 29,000 bpd in 2017 and 57,000 bpd in
2018.
"We see a risk for a weaker oil price towards the end of the
year ... because shale is delivering so much oil and OPEC might
fight back," Jarand Rystad told Reuters earlier this week.
Strong returns in the shale sector are pulling in fresh
investment, while round-the-clock drilling and new rigs are
boosting production, he said.
Fast-growing shale oil output is adding to the dilemma faced by
the Organization of the Petroleum Exporting Countries (OPEC) and
other non-OPEC countries like Russia as they consider whether to
extend output cuts into the second half of this year or boost
volumes in a bid to regain market share.
"A volume war is if they do not extend the production cuts and
bring all the fields back into production," Rystad said,
referring to oilfields that have been shut for maintenance as
Middle East producers comply with production cuts.
A boost in Middle East output would most likely hit mature
basins in Southeast Asia or in the UK North Sea more than U.S.
shale producers because of their high investment costs, said
Wood Mackenzie's global exploration analyst Andrew Latham.
"It will take an almighty price war to really shut down the
sweet spots of the (U.S.) Permian because the well production is
so good and the breakevens are so low," Latham said.
U.S. shale oil output was set for its biggest monthly rise in
more than two years in May, government data showed this month,
jumping by 123,000 bpd to 5.19 million bpd.
Total chief executive Patrick Pouyanne warned last week that the
rapid increase in shale output could push oil prices down again
by year-end.
(Reporting by Mark Tay and Florence Tan; Editing by Richard
Pullin)
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