When OPEC meets in Vienna next week to discuss an extension of the production cut agreement it brokered with eleven other non-cartel petrostates, America’s shale producers won’t be the only suppliers on its mind: a number of other non-OPEC nations are also notching production increases that, taken together, are counterbalancing the petrostate effort to reduce the global oversupply of crude. The WSJ reports:
Not counting the U.S. and the 24 countries in the OPEC-led coalition, the next five biggest producing countries are poised to increase their combined output by around 300,000 barrels a day, according to a Wall Street Journal survey of five oil research agencies and investment banks.
Canada and Brazil, the world’s seventh and 10th biggest suppliers, are projected to record the fastest production growth outside the U.S. this year as long-planned projects come online. Norway and the U.K. are also seen as raising production this year, though by smaller amounts. Of the five countries, only China’s output is expected to fall this year.
This is part of the new oil reality that Daniel Yergin recently described as one characterized by a “cost recalibration.” Outside of the petrostate stalwarts, producers are adjusting to today’s lower price environment by trimming the fat and reaping efficiency gains (enabled by information technology) to stay profitable even at $50 per barrel crude. We’re seeing that most clearly in America’s shale formations, but Brazil, Canada, Norway, and the UK are on the same track.
OPEC & co. will almost certainly agree to extend their cuts through the end of the year next week. Saudi Arabia and Russia, the two biggest producers by output in this makeshift coalition, have already expressed a willingness to constrain output through March of next year. At this point, a majority of OPEC’s membership has come out in support of more cuts, which could make next week’s summit “a bit of a non-event,” according to commodity analyst Jan Edelmann.
But if this plan had worked, it wouldn’t need to be extended—the fact that this group is being forced to continue to cede market share is in itself an admission of defeat. America may be this group’s enemy number one, but all around the world oil supplies are surging.