New Oil Hits Opec's Targets: Rystad

Oil production from non-Opec countries is expected to grow at record speed in 2020, creating a headache for the Saudi-led group according to research by consultancy Rystad Energy. Opec will need to extend and deepen production cuts if it is to have any hope of supporting the oil price in the near-term, said upstream research head Espen Erlingsen December 4.

The energy ministers of the member states are meeting in Vienna December 5-6 to discuss ways to keep prices up, through production cuts. The present agreement, with Russia also participating, expires in March next year. Opec’s share of the global output is shrinking as other countries, who are not members, produce more: chiefly, US, Norway and Brazil. 

Rystad Energy said December 4 that total non-Opec production (crude oil and condensate) will grow by around 2.26mn barrels/day in 2020, “creating a challenge for Opec and Russia as they attempt to balance the global oil market next year."

Tight oil from the US onshore is expected to be a key contributor, adding about 1.35mn b/d, or half the total of new production. Offshore will balloon by an impressive 1.25mn b/d, almost 0.9mn bpd of which will come from deepwater, where Brazil's fields are ramping up. Norwegian growth will in large part be driven by Johan Sverdrup.

The extent of the oversupply was shown by the response to the mid-September attacks on major Saudi infrastructure: crude prices very quickly returned to their previous value. At time of press, benchmark Brent crude was trading at $62/barrel and US WTI at $57/barrel.

Lower crude prices mean lower LNG prices following the indexation clauses in many long-term contracts with Asian buyers, but crude oil is still high enough to push the price of contract LNG above the price of spot LNG in northeast Asia.