A new report from OPEC estimates that crude oil production from non-OPEC nations will increase by 950,000 barrels per day during 2017. This is a dramatic increase from last month’s estimate of a non-OPEC rise of 580,000 during the year.
This new, much higher estimate has raised concerns within the OPEC cartel that its efforts to balance the global supply/demand equation will require it to either extend its current production limitations into 2018, or to agree to even deeper cuts in its member countries’ own production levels. Based on these concerns, the new report urges all non-OPEC nations to limit their own production:
A large part of the excess supply overhang contained in floating storage has been reduced and the improvement in the world economy should help support oil demand. However, continued rebalancing in the oil market by year-end will require the collective efforts of all oil producers to increase market stability, not only for the benefit of the individual countries, but also for the general prosperity of the world economy.
The report singles out U.S. shale producers as the main culprit for the lingering over-supply situation. This is not surprising, given that overall U.S. oil production has risen by a whopping 800,000 bopd since last October, as U.S. producers have activated more than 250 new drilling rigs and implemented higher drilling budgets for 2017.
This expectation that U.S. producers are somehow going to join together with the national oil companies and controlled markets of OPEC, Russia and other countries to intentionally limit production betrays the same fundamental misunderstanding of the nature of the U.S. oil and gas industry that created the global supply glut and resulting price collapse in the first place.