BAKU, Azerbaijan, March 18
By Leman Zeynalova – Trend:
In tandem with projected higher oil demand, total oil production by 2026 is set to rise by 10.2 mb/d from a six−year low of 94 mb/d in 2020, Trend reports with reference to the International Energy Agency (IEA).
Producers from the Middle East are expected to provide half the increase, largely from existing shut−in capacity. That marks a dramatic change from the past few years when the United States dominated world supply growth.
At the start of the forecast, as OPEC+ unwinds record output cuts of 2020 and ramps up towards pre-Covid levels, there will be ample supply available to maintain a reasonable spare cushion. But if the shift to clean energy does not speed up, demand for oil supply by from there. Should Iran remain under sanctions, our analysis shows that at the end of the forecast period, effective spare production capacity could fall to 2.4 mb/d to the lowest level since 2016. In that case, Saudi Arabia, Iraq, the UAE, and Kuwait, with their surplus capacity and relatively low-cost reserves, may have to pump at or near record highs to help keep the world oil market in balance. Led by Saudi Arabia, the four Gulf countries would contribute 46% of the increase in supply from 2020 to 2026.
The Gulf producers, along with Russia, form the backbone of the OPEC+ group of nations that account for more than half the world’s oil production. Total oil output from the 23 OPEC+ countries would rise by over 6 mb/d from 2020 to 2026 to reach 54 mb/d, while non-OPEC+ would contribute 4 mb/d to 50 mb/d.
Outside of OPEC+, production prospects are subdued. The slump in oil prices in 2020 and the uncertain recovery in demand have seen the sanctioning of new projects fall to the lowest level in recent history. Upstream investments fell last year by a record 30 percent versus 2019. Brazil, Guyana and Russia provided 70 percent of the resources sanctioned for development in 2020. All the 2020 projects combined globally will add less than 1 mb/d of production by 2026.
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