Global Oil Production Projected To Boom Despite Opec’s Cut

It seems the global crude-oil production will be on the rise on 2018, and it’s not only because of the output of the United States. The 14 member-countries of the Organization of the Petroleum Exporting Countries (OPEC) have made a deal with several non-members on December 2016 to cut production by 1.8 million barrels per day.

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After the OPEC reached an agreement with non-OPEC oil producers for an extended oil production cut until March 2018, compliance to the pact is not as strict as expected. Russia has recently expressed its concerns about its loss of market share in oil to the United States as President Donald Trump has decided to pull U.S. out of the Paris Agreement. This move by the U.S. could help ease limitations and restrictions on its local fuel sector, which can equate to bigger oil production. And just recently, three Persian Gulf countries have cut ties with Qatar. OPEC also changed its exemptions for Nigeria and Libya as they struggled with internal conflict. Royal Dutch Shell has just lifted force majeure on Nigeria’s Forcados crude, as the country only exports online—the first time in 16 months. Libya has also recently hit its highest oil production even with the brief shutdown of the country’s biggest oilfield, Sharara.

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Even with the cut from OPEC, member-countries are looking for ways to boost their oil industries. After all, even barrels from the U.S. are looking for consumers in Asia and Europe. This dynamic change points out the need for a better resolution from OPEC.

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Not a Drill: Iran As a Player In The Oil And Gas Industry

In 2014, the United States became the world’s largest oil producer. This shook the normalized global economic order and stirred some internal cultural shifts in significant oil-producing countries. The fracking boom, responsible for the oil and gas preeminence enjoyed by the U.S., along with simple economic realities, also sent global supply outrunning demand. The oil-exporting countries that are not taking this too well---Russia, Venezuela, and in the spotlight, Saudi Arabia---are now in a pickle apropos cooperation toward curbing global production.

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While the U.S. is also hurt by falling oil prices, it can afford some ascendancy where supply is concerned. It can go as far as being the playground elder, giving Saudi Arabia a sermon about sharing oil markets. President Barack Obama’s landmark leniency toward Iran has also thrown up conspiracy theories about the causes of falling oil prices. Some have accused Saudi Arabia of sabotaging the prices to put competitors like Russia, Iran, and the U.S. in a tight spot. Some see the U.S. using Iran as a pawn against Russia.

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Wherever the undercurrents lie, Iran will again be making its mark in an industry where it has a historical and competitive advantage. Before Western sanctions obstructed the flourishing of its oil and gas industry through the denial of Western technology, Iran exported oil to Europe. The relationship has been given another go this year, with the signing of the nuclear treaty and the lifting of the embargo. Iran will also likely look to the Old World for technologies in refining and developing hydrocarbon fields.

Its four-year absence in the industry might reveal new, oil-hungry export markets such as China, the world’s largest importer, Japan, and India. The country’s oil potential could revert to pre-sanction, historical highs of six million barrels a day, the going rate on the eve of the 1979 Revolution. Iran’s potential in the oil and gas industry could introduce more geopolitical upheavals, not least in the board rooms of OPEC.

The president and founder of Southlake Resources Group, Cody Winters is an experienced and accomplished oil and gas businessman for over 12 years. Visit this blog for more updates about the industry.