U.S. oil expected to meet most of world’s growth in demand

HOUSTON – A global energy watchdog says booming production in the United States will meet most of the world’s growth in demand for oil in the next few years.

The International Energy Agency believes U.S. oilfields will offset slow growth from the OPEC cartel.

The group, based in Paris, issued its annual oil market report Monday. The resurgence in U.S. production is the most prominent change since the group’s last forecast.

The agency continues to worry that globally, investment in new production has not recovered from the oil price plunge between mid-2014 and 2016. If not enough is spent on exploration, that could lead to future shortages and price spikes.

The IEA predicts that within five years, the cushion of production capacity over expected demand will fall to its lowest level since 2007. That was the year before the price for oil in the U.S. surged close to $150. Prices are less than half that today.

The energy agency, which advises energy-consuming countries, said Monday that global energy demand will grow about 7 percent by 2023, to 104.7 million barrels of oil per day. Citing the production capabilities of drillers operating in U.S. shale fields, the world capacity to produce oil will hit 107 million barrels a day.

The strongest growth is expected to come from the Permian Basin, a vast oil and gas pool that lies under parts of Texas and New Mexico. Output there is expected to double by 2023.

The energy group forecasts that the U.S. will supply enough oil to meet 80 percent of the growing demand over the next three years, and Canada, Brazil and Norway will meet the rest.

All that U.S. production should keep prices at the pump from rising. The energy group’s director, Fatih Birol, said the study assumed oil prices around $60 a barrel, which is just below the current international benchmark price of $65.64 a barrel.

OPEC, the Organization of the Petroleum Exporting Countries, will increase capacity only modestly through 2023 largely because of sharply falling production in Venezuela, according to the energy agency forecast.

OPEC has squeezed production enough to drive prices up – benchmark crude has roughly doubled since bottoming in early 2016. The rebound, however, also spurred more drilling in the U.S., where operators found success in shale formations stretching from Texas to North Dakota to the Northeast.

“We think we are going to see a major second wave of U.S. shale production coming strongly,” Birol said Monday at the CERAWeek IHS Markit conference in Houston.

Meanwhile, the energy agency has scaled back its forecast of OPEC production since last year, another sign of the United States’ ascendancy in energy.

Environmentalists, scientists and some energy analyst question whether the world is rapidly approaching a “peak demand“ scenario as policies are enacted to reduce carbon emissions from burning coal, oil and natural gas.

Birol said, however, that his group sees no sign that demand for fossil fuels will peak – or even plateau – in the next five years.