IEA warns of oil supply crunch unless drillers build new projects

Posted March 07, 2017

Oil fell in NY as clashes between armed factions in Libya curbed crude output, while US drilling increased.

Under the deal between OPEC and 11 non-OPEC nations to cut crude oil supply by nearly 1.8 million bpd between January and June, Azerbaijan has pledged to cut 35,000 bpd out of non-OPEC's 558,000 bpd share.

"If prices climb to $80 a barrel, U.S. LTO production could grow by 3 million bpd in five years", the IEA said.

"As long as producers in the US add more drilling rigs, shale production will continue in a sustained uptrend adding further pressure on OPEC to not only extend the accord beyond the original six months, but possibly cut even deeper", said Dominick Chirichella from the New York-based Energy Management Institute.

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"Signals we get from oil companies [both national and private] are not very encouraging". One of the biggest questions in the oil market is how quickly and how much shale producers will boost output.

Pointing to U.S. President Donald Trump's promise to reduce regulations in the sector in order to launch an "energy revolution" in the country, experts indicate that American energy companies will have a more positive view in the conference.

Exxon, which is expected later this year be eclipsed by Saudi Aramco as the world's largest publicly traded oil producer, recently pledged to boost this year's spending by 16 percent to expand operations, especially in shale production.

The country's energy ministry said today that a letter it had received from the Joint Monitoring Committee praised the country for complying "214 percent" with its share of cuts.

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That newfound investment vigor and projections for stronger shale production have kept a lid on the recovery.

Global benchmark Brent crude was down 0.98 per cent, at $55.35 per barrel, after it finished the previous session up 1.5 per cent. "In 2017, if we don't see a substantial increase, the market tightens after 2020".

Members of the Organization of the Petroleum Exporting Countries (OPEC) including Iraq and non-OPEC countries such as Russian Federation past year agreed to cut oil production by some 1.8 million barrels per day in a bid to buoy global oil prices.

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