The International Energy Agency released its report, Oil 2019, an annual oil market forecast, stating that the United States will lead oil-supply growth over the next six years. This growth is due “to the incredible strength of its shale industry, triggering a rapid transformation of global oil markets,” the report stated.
The story of how the United States transformed itself into a major exporter within less than a decade is unprecedented, according to the report, Oil 2019. “It is due to the ability of the U.S. shale industry to respond quickly to price signals by ramping up production.” By 2024, the United States will export more oil than Russia and will close in on Saudi Arabia.
“The second wave of the U.S. shale revolution is coming,” said Dr. Fatih Birol, the IEA’s Executive Director. “It will see the United States account for 70% of the rise in global oil production and some 75% of the expansion in LNG trade over the next five years. This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy.”
In the downstream sector, product markets are rapidly changing with the implementation of the International Maritime Organization’s new rules governing bunker fuel quality in 2020. “Although the shipping and refining industries have had several years notice, there have been fears of shortfalls when the rules come into effect,” IEA said.
While global oil demand growth is set to ease, in particular as China slows down, it still increases an annual average of 1.2 mb/d to 2024, according to the report. Still, the IEA continues to see no peak in oil demand, as petrochemicals and jet fuel remain the key drivers of growth, particularly in the United States and Asia.
U.S. shale in a post-IMO and petrochemicals world
The U.S. shale revolution is also altering the picture for refiners. These barrels are generally lighter than the average crude barrel, which means they require less complex refining processes to turn them into final products, the report stated.
Sulphur is another key issue. An average product barrel is allowed to contain only 0.34% of sulphur, and this percentage will fall even more with the IMO regulations, to 0.24%. However an average crude barrel contains 1.2% sulphur, requiring refiners to use a lot of natural gas to produce hydrogen to use in desulphurisation operations — a costly and CO2 intensive process.
Shale crudes, on the other hand, have a significantly lower sulphur content, requiring less costly operations.