Non-OPEC Production to Fall to 2-Decade Low

By Douglas A. McIntyre Updated Sep 11, 7:00AM EDT · Published Sep 11, 5:49AM EDT

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Presumably, low oil prices have cut incentives for production. International Energy Agency (IEA) experts say this will chop production to a two-decade low. However, OPEC is expected to keep its status quo, and keep up pumping.

In its Oil Market Report for September, IEA management wrote:

Low price seen triggering largest cut in non-OPEC supply in more than two decades, raising “call” on OPEC in 2016

Also:

Lower output in the United States, Russia and North Sea is expected to drop overall non-OPEC production to 57.7 mb/d. US light tight oil, the driver of US growth, is forecast to shrink by 0.4 mb/d next year.

OPEC crude supply fell by 220 000 barrels per day (220 kb/d) in August to 31.57 mb/d, led by declines in Saudi Arabia, Iraq and Angola. The group’s output stood 1.2 mb/d higher than a year earlier. The “call” on OPEC climbs to 31.3 mb/d in 2016, up 1.6 mb/d year-on-year as lower prices dent non-OPEC supply and support above-trend demand growth.

Global oil demand growth is expected to climb to a five-year high of 1.7 mb/d in 2015, before moderating to a still above-trend 1.4 mb/d in 2016 thanks to lower oil prices and a strengthening macroeconomic backdrop.

Two other factors will affect oil prices. One is that low prices also have begun to cut into exploration activity, which could change previously planned supply for years. The other is that a soft economy in China will affect demand. These will offset, to some unpredictable extent, where oil prices will head.

This forecast, and others, have not prevented oil from continuing to drop or firms such as Goldman Sachs from predicting further drops. Saudi Arabia has refused to meet with other OPEC nations about how to stop the downward prices in oil, pushing crude even lower.

The IEA report supports the probability of higher prices in 2016. The real market, where prices are ultimately set, is not cooperating.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.