Market News & Analysis
US oil output to experience sharpest fall in 24 years, says IEA
City Index September 11, 2015 2:36 PM
US oil output next year is to experience the sharpest fall since 1992 due to low oil prices, according to the International Energy Agency (IEA).
"Oil's price collapse is closing down high-cost production from Eagle Ford in Texas to Russia and the North Sea, which may result in the loss next year of half a million barrels a day, the biggest decline in 24 years," it said in a statement.
US oil production has reached record highs in recent years, but fracking is expensive, and extraction is only worthwhile if crude oil prices are high.
Weakening demand in industrialised countries
The price of oil has taken a sharp dive in recent months. From 2010 to mid-2014, the average price of a barrel of oil was around $110 (£71) but the remainder of last year and 2015 saw prices plummet. US crude oil has now fallen to around $45 a barrel.
This is due to a growing oversupply due to weakening demand in industrialised countries following the financial crisis.
Opec opposes cuts in production
The glut has prompted a number of meetings between members of the Organization of Petroleum Exporting Countries (Opec). Nations such as Saudi Arabia and non-member Russia opposed a cut in production to boost prices and the production levels were maintained.
Saudi Arabia's representative at the Opec, Mohammed al-Madi, denied that Saudi Arabia's oil policy had a "political dimension".
The Saudi representative for Opec said: "There isn't any political dimension in what we do at the oil ministry – our vision is commercial and economic… We are not against anybody or against the [production of US shale gas]. On the contrary we welcome it, as it balances the market in the long run."
The International Energy Agency expects that world oil stocks will continue to build until at least the end of 2016, with US oil production dropping by 0.4 million barrels a day in 2016. It grew by 1.7 million barrels a day last year.
More From City Index
- Companies reporting for week starting Monday 1st May 2017 April 28, 2017 9:13 AM
- Companies reporting for week starting Monday 24th April 2017 April 21, 2017 11:00 AM
- See More
From time to time, GAIN Capital Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.