OPEC officials gathering in Vienna on Friday to prepare for next week’s ministerial meeting kept their focus on rising U.S. shale oil production, which has been diluting the price impact of their production cuts.
National representatives from the Organization of Petroleum Exporting Countries and officials from several non-members heard a presentation on the outlook for the U.S. industry from Roger Diwan, a Washington-based analyst at IHS Markit Ltd., according to delegates familiar with the matter. Mark Papa, a partner at private equity firm Riverstone Holdings LLC and former boss of shale pioneer EOG Resources Inc., also spoke to the group, delegates said.
Officials at the meeting were relieved that the two outside consultants had estimates for growth in average U.S. crude output of 450,000 to 500,000 barrels a day this year, lower than the 562,000 barrel-a-day forecast from OPEC’s own analysts, said two delegates.
The emphasis on U.S. production underscores the dilemma for OPEC and its allies as they consider whether to extend their cuts beyond June. The producers, who together account for about half the world’s oil supply, have seen the initial price boost from their historic agreement fade as shale companies deployed more rigs and raised the country’s output to the highest since 2015. That recovery could accelerate if they decide on May 25 to prolong the curbs.
IHS’s Diwan presented an estimate that U.S. output this year will be about 500,000 barrels a day higher on average than in 2016, the delegates said, asking not to be identified because the meeting was private. That still means that production at the end of 2017 will be 700,000 to 1 million barrels a day higher than at the start, the delegates said.
That compares with a supply reduction of 1.2 million barrels a day from October levels implemented by OPEC, plus a cut of less than 400,000 barrels a day from non-members.
Papa, who helped create the shale industry more than a decade ago, estimated that average U.S. output would be 450,000 barrels a day higher this year, the delegates said.