In an opinion piece published by the Financial Times (FT) over the weekend, the editor addresses two key issues beyond the OPEC decision that will shape up the oil markets in the coming years.
“The first is the situation in Venezuela, which has gone from bad to worse over the past two months. In the short term, the situation remains the greatest uncertainty hanging over the oil market. The country’s production of crude oil fell to 1.36m barrels a day in May, 600,000 b/d down from its level a year ago.
The International Energy Agency has raised the possibility that output could fall to 800,000 b/d next year. Given the dramatic collapse in Venezuelan living standards, it is hard to imagine that the government can remain in power. But so far predictions of political change have not been fulfilled.
The second, and potentially more destabilizing, issue in the longer term is the prospect of a sharp increase in the production of so-called “tight oil” from shale rocks in the US. Tight oil production is now running at more than 5m barrels a day and will this year lift total US oil output to over 11m b/d — the highest figure for almost 50 years.
The growth in shale production over the past 10 years has been profoundly disruptive, first for the gas market and then for oil. The US is now an exporter of both oil and gas and is no longer dependent on imports from the Middle East — a shift with major political implications.“
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