US oil dominance has an expiration date

The good times for U.S. oil producers won’t last for long, with the Organization of the Petroleum Exporting Countries (OPEC) forecasting in its 2017 World Oil Outlook (WOO) that U.S. tight oil output will peak in 2025.

In the medium-term, U.S. shale will remain the most important contributor to non-OPEC supply, but come 2025, the pressure will be back on OPEC to increase crude oil output to make up for the fall in American output. Future output growth could also come from Canada, Russia and Argentina.

While this is on the horizon, right now when it comes to oil production, U.S. shale oil output is still a major component of the global oil supply.

In its latest report, OPEC upgraded its expectations for shale oil output versus last year’s WOO. This upgrade comes as U.S. shale oil producers have been more efficient, and decreased their costs. OPEC noted that as oil prices go up, some costs will also rise, but at the same time some of these efficiencies will last.

A departure from the norm, in this year’s WOO OPEC refrained from making price projections. At their press conference discussing the 2017 WOO, OPEC noted that prices are being driven not just by fundamentals, but by “other factors,” including geopolitics.

OPEC says that it has seen market fundamentals turning extremely bullish since the summer of 2017. During the conference the organization added that “the oil market has been out of balance since the fall of 2014, and it is finally coming back to balance.”