Monthly oil price statistics
Data for OECD countries up to June 2020
IEA (2019), Oil 2019, IEA, Paris https://www.iea.org/reports/oil-2019
The United States will lead oil-supply growth over the next six years, thanks to the incredible strength of its shale industry, triggering a rapid transformation of global oil markets. By 2024, the United States will export more oil than Russia and will close in on Saudi Arabia – a pivotal milestone that will bring greater diversity of supply in markets.
Meanwhile product markets are on the eve of one of the biggest shakeups ever seen, with the implementation of the International Maritime Organisation’s new rules governing bunker fuel quality in 2020. Although the shipping and refining industries have had several years notice, there have been fears of shortfalls when the rules come into effect.
The incredible growth in US shale, from next to nothing in 2010 to more than 7 mb/d at the start of this year, is transforming global oil markets.
This is happening because US shale is able to respond to price signals more swiftly than other sources of supply - in fact even more US supply could be on the way if prices rise beyond where they are today.
The ability of the US to turn itself into a major exporter in less than a decade is unprecedented. By 2024, US oil exports will overtake Russia and close in on Saudi Arabia. This brings greater diversity of supply to markets.
The US is joined by Brazil, Iraq, Norway, the UAE and Guyana as the biggest sources of supply growth.
Iran and Venezuela are forecast to post the deepest losses, though the outlook could change dramatically depending on political factors.
Such a strong build up of supply will require substantial investment and for a third consecutive year, upstream investment is set to rise. Following higher than expected spending last year, global upstream capex for oil and gas is set to increase by 4% in 2019.
World oil demand growth remains solid, although the pace of growth is slowing. China’s growth slows while India’s demand remains robust, and by 2024 we forecast that India’s annual volume growth will equal China’s.
Demand in the Rest of the world growth is dominated by petrochemical projects, mainly in the US, which benefits from cheaper feedstock as a consequence of the shale revolution.
One of the biggest shake-ups in the product markets is right around the corner — the IMO 2020 regulation bans high sulfur fuel oil (HSFO) from the bunker pool. Although the shipping and refining industries have been preparing for the new rules for several years, there have been fears of shortfalls when the rules come into effect.
Indeed, the bunker fuel demand landscape will change dramatically in 2020. Demand for HSFO, the main vessel fuel since the 1960’s, will fall from 3.5 mb/d to 1.4 mb/d in just one year. We also estimate that there will be 4 000 scrubbers installed on large vessels by the end of 2020, consuming 700 kb/d of fuel oil.
Many shipping companies will prefer to use marine gasoil (MGO) instead of a new very low sulfur fuel oil (VLSFO), despite its higher price. The quantity of VLSFO produced will initially be limited to 1 mb/d because of reduced availability of low sulphur blending materials. Some shipping companies may also be reluctant to adopt a new fuel immediately, and would prefer to use MGO until they have confidence that VLSFO will be easily available in ports and stable and compatible with similar grades.
While there is no doubt that this transformation will be a challenge, it will be manageable over time. Orders for scrubbers to be fitted on ships have increased, and as demand for high sulphur fuel oil plummets there will be enough marine gasoil as well as new ultra-low sulphur fuel oil available to fill the gap.
The US shale revolution is also altering the picture for refiners.
These barrels are generally lighter than the average crude barrel, which means they require less complex refining processes to turn them into final products.
Sulphur is another key issue. An average product barrel is allowed to contain only 0.34% of sulphur, and this percentage will fall even more with the IMO regulations, to 0.24%. However an average crude barrel contains 1.2% sulphur, requiring refiners to use a lot of natural gas to produce hydrogen to use in desulphurisation operations — a costly and CO2 intensive process.
Shale crudes, on the other hand, have a significantly lower sulphur content, requiring less costly operations.
Data for OECD countries up to June 2020
Data for OECD countries up to February 2021
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