The US shale revolution can eat in to the market shares of producing nations in the Organization of Petroleum Exporting Countries (OPEC). However, recently, Saudi Arabia leadership has proclaimed they do not consider the rapid expansion in oil and gas output that US has been experiencing as a result of its shale growth a threat.
Saudi Arabia’s deputy oil minister, Prince Abdulaziz bin Salman stated, “We need to make sure that the world economy comes out decisively on a growth pattern and, if that can be established, I think that the world economic growth will be sufficient to handle growth from all sorts – shale oil, shale gas, tight oil and including renewable.”
Supply increasing, but so is demand
Non-OPEC oil supply is estimated to increase by 1.2 million barrels per day (mmbblpd) each year for the next two years, according to the recent monthly oil market report released by OPEC. This will eat in to OPEC’s share, which is expected to drop 0.3 mmbblpd to 29.6 mmbblpd. Furthermore, according to the World Oil Outlook of OPEC, the demand for OPEC-produced crude oil is expected to diminish over the next five years.
However, Abdulaziz has emphasized that there is an adequate market demand to easily accommodate increased US output. “The world economy over the long term will need every contribution of every source of energy available,” he said. “The kingdom welcomes new resources of energy supplies, as they are needed.”
Abdulaziz also emphasized that the new energy supplies were actually necessary to sustain the oil prices at a reasonable level. The shale boom has been going on for a while and the crude market has endured the additional flows with grace. Brent crude prices remained fairly stable over the past year, trading between USD 100 and USD 120.
Saudi Arabia’s Prince: Stable market good for everyone
“The price is good for everybody, it enables the producer to produce and continue to produce and I don’t think its affecting the international economy in any bad way. But so far everybody is enjoying a wonderful stable market, everyone is prosperous. There are people in Texas who say they are pushing the pedal to the metal and everybody is enjoying it,” exclaimed Abdulaziz.
Saudi is of the perspective that the global economy is altering in a way that the emerging economies are taking a bigger chunk of the global demand. The increasing size of the eastern nations means that the global demand will swell and so will the global energy demand. It would be healthier for the global crude prices if this increasing burden is shared by other producers. This would not only help sustain fair prices but also fill the supply gaps in the crude oil chain.