OPEC recently announced that it expects to produce more than one million fewer barrels per day this year than it currently does. As Reuters reports, the oil cartel sees production falling in the face of the global glut and resultant precipitous price drop:
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast demand for the group’s oil would drop to 28.78 million barrels per day (bpd) in 2015, down 140,000 bpd from its prior estimate and well over 1 million bpd less than it is currently producing.
OPEC, led by Saudi Arabia, has declined to cut production in response to plummeting prices, instead opting to wait out the bear market (and the painful budget shortfalls that it’s producing for the world’s petrostates) in a bid to gain market share against the upstart United States. Buoyed by booming shale production, the U.S. has emerged seemingly out of nowhere as a major global oil supplier. While historically OPEC has curtailed output to stabilize prices, it’s now expecting U.S. producers to play that swing producer role. Reuters continues:
At OPEC’s meeting, top exporter Saudi Arabia urged fellow members to combat the growth in supply from competing sources including U.S. shale, which needs relatively high prices to be economic and has been eroding OPEC’s market share.
Analysts are already forecasting slower growth for American oil production in 2015, but still expect U.S. output to continue its upward trajectory during the course of the year:
In the report, OPEC forecast total U.S. oil supply will average 13.81 million bpd in 2015, up 950,000 bpd from 2014. The growth rate is slower than the 1.05 million bpd expected last month, but the United States is still by far the largest contributor to non-OPEC supply expansion.
So while OPEC’s members run up massive budget deficits during this oil price plunge, so far it appears they’ll only succeed in slowing the meteoric rise of the United States, not stopping it. And as for their own market share, they’re already seeing it start to slip away.