- Saudi Arabia and Russia did ‘good job’ managing market last year says Glencore executive
- The Permian basin in Texas and New Mexico is the biggest shale oil producing region of the US where output is expected to double between 2017 and 2023, according to estimates from IHS Markit
LONDON: The completion of a new pipeline in the key oil producing area of the US this year will test the power of OPEC and its allies, the chief of the International Energy Agency (IEA) said on Friday.
Fatih Birol said global oil markets had not yet seen the full impact of the shale industry and that the addition of new pipeline capacity in the Permian Basin, would make US producers much quicker at responding to market demand.
The Permian basin in Texas and New Mexico is the biggest shale oil producing region of the US where output is expected to double between 2017 and 2023 according to estimates from IHS Markit.
“A major bottleneck in the United States in the Permian was the pipeline capacity. There is a huge pipeline construction that is going to finish by the end of 2019 which will increase the capacity of bringing oil to the markets by two thirds in one year and this will increase the ability of US oil to react much faster, IEA Executive Director Fatih Birol said in a panel discussion at the World Economic Forum in Davos on Friday.
The sharp increase in US shale oil has disrupted the global energy market and in December the US became a net exporter of oil for the first time in 75 years.
The prospect of additional capacity from the Permian, geopolitical uncertainty and an economic slowdown in China is expected to make for more swings in the oil price this year, said Fatih.
“This year I expect the volatility may be even stronger than last year,” he said.
Political upheaval in major oil exporter Venezuela is adding to the confused outlook, according to trading houses Glencore and Mercuria Energy Group.
“I would expect more volatility because of Venezuela,” Mercuria CEO Marco Dunand said at Davos.
Glencore’s head of oil, Alex Beard, said that Saudi Arabia and Russia did a good job in managing the market last year — a reference to cooperation between Riyadh and Moscow to cut output last year to stabilize the oil price.
The CEO of the Russian Direct Investment Fund, Kirill Dmitriev, said that the possibility of such cooperation had earliernbeen dismissed by some commentators who had been proved wrong.
“Before it happened, no one believed it was possible,” he said.