Alexey Gromov, Principal Director on Energy studies of the Institute for Energy and Finance, commented to the Neft and Capital Internet portal on the current shale oil production in the United States and the prospects for new influential players to appear on the global oil market.
As Alexey Gromov noted, the trends that are observed in the market now are not an indicator for the whole of 2024.
According to Alexey Gromov, this whole situation is quite predictable and OPEC+ takes this into account. The cartel is taking a wait-and-see attitude, it wants to see what happens to weak oil demand in the world and when American shale production slows down or reaches a plateau. OPEC+ has more options than the United States for both lowering and increasing production in order to respond to the dynamics of the States accordingly."The reduction of OPEC+ production in January is simply compliance with the deal concluded back in 2023, where these parameters were stipulated for the first quarter of 2024. The main efforts to consciously reduce, by the way, are on the part of the main participants of the cartel — Saudi Arabia, the United Arab Emirates. They are trying to ensure a balance in the market so that there is no collapse in prices against the background of weak demand. Smaller OPEC members, on the contrary, are running out of time to reduce production. But this does not mean that the cartel will do this all year.
The growth of production in the United States is also a trend that may change. There are forecasts for the growth of shale production until 2025 and even until 2026. But I believe that by the end of 2023, it was close to maximum saturation in the United States, and now there are just inertial processes. The growth will stabilize in 2024, because the more production in the United States, the more difficult it is to maintain it at the current level due to the specifics of oil extraction by hydraulic fracturing. In shale deposits, production falls after 1-1.5 years. But it is also necessary to compensate for the drop in volumes at old wells. All the forces of American companies will go away to maintain the current parameters," the expert explained.
At the same time, the expert stressed that OPEC+ in the future should be wary of competition in the oil market not from the United States, but from Latin American countries.
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