The International Energy Agency has reported that OPEC’s share of the oil market will grow starting 2020 as prices are set to recover gradually to $80 per barrel.
Non-Opec Oil Supply Set To Stagnate by 2020
Oil supply outside of OPEC is however expected to decline as non-OPEC countries cut spending.
It is expected that OPEC’s share of global supply will remain at 41 percent up to 2020. The supply is set to increase to 44 percent by 2025, although the IEA had predicted the supply would only increase to 42 percent a year ago.
Over the next five years, production from non-OPEC countries is expected to slow and eventually stop by 2020.
Last year, OPEC decided to defend its market share by supporting prices and this has put a downward pressure on supply growth from rivals such as U.S. shale oil.
Although the 40 percent decline in crude oil prices has seen a sharp reduction in OPEC’s revenues, the group’s decision to support rather than cut prices will, in the long run, prove to be beneficial especially for those countries that will be able to increase production.
The IEA noted, “Market opportunities are available for members that can expand future production.”
“With non-OPEC producers driven out of the market by lower prices, Iran and Iraq will be set to increase output,” it said.
For the current output levels to remain stable, the global oil and gas industry would need to continue spending up to $630 billion on oil exploration and production annually.
The IEA predicts that investments will decline by 20 percent by the end of 2015 and shrink even further in 2016, the first consecutive decline since the 1980s, according to Fatih Birol, the IEA Executive Director.
Due to a reduction in investments, non-OPEC crude supply will stagnate to 55 billion barrels a day heading into 2020. This is 1.3 million more than 2015 production levels.
It is also expected that consumption levels will slow heading into 2020 due to high oil prices, an increase in energy-efficiency regulation and widespread use of alternative fuels.
The IEA reports that by 2040, oil consumption in the OECD countries will have declined by 10 million barrels a day.