Global demand for oil better than expected, but it could take 2018 to even out market, economist says
GRAND FORKS—Demand and costs in the oil industry are doing better than expected, but it could take another year before the global market rebalances itself, an expert in the field said Thursday.
"We do see the market rebalancing," ConocoPhillips chief economist Helen Currie told attendees of the annual North Dakota Petroleum Council meeting in Grand Forks. "It is taking longer than a lot of analysts had been projecting, but we do see the market coming back into balance by the end of 2018."
Currie was one of the last speakers of the three-day meeting that began Tuesday at the Alerus Center. The conference attracted nearly 400 people and focused on how North Dakota can improve its technology and research to drill oil more efficiently.
"The industry as a whole, and not just the industry in the U.S., continues to get better at producing every barrel that we produce," she said.
Oil prices and production in the U.S. was hampered in the mid-2010s after producers in the Middle East flooded the global market. After dipping below $30 a barrel in January 2016, oil prices per barrel have stayed between $40 and $52 in the last year.
"The general consensus is that prices will probably stay in the $50 to $60 range for a few years, maybe into the 2020s," she said. "It is in the early 2020s that there is a lot of industry debate on what will be the forces that will push prices up."
The global demand is performing and is turning out better than expectations made earlier this year, Currie said. That's in part due to supply falling in 2016 and 2017, particularly in Iran, Nigeria and Libya, according to graphics she presented at the meeting. OPEC has also cut production.
The cost to produce oil is less than expected, Currie said, adding production of oil, as well as demand across the world, is expected to grow in the next decade.
Shale gas production also is expected to grow significantly, with worldwide demand having the potential to double by 2030.
The news of oil demand and production increasing could make a goal set by North Dakota Gov. Doug Burgum easier to reach. In July, he challenged the petroleum industry to double daily production in the state from a million barrels to 2 million barrels.
It's possible that goal can be reached, Currie said, but the companies will decide if they want to drill enough in North Dakota to meet the challenge.
"Sure, you can set a political target of 2 million barrels per day for the state, and I'm not saying it can't get there. It absolutely could," she said. "I think it is really up to each individual company to decide what's (their) best growth plan and what makes sense there."