OPEC says low oil prices may hit U.S. output by late 2015

Mon Mar 16, 2015 11:31am EDT
 
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By Alex Lawler

LONDON (Reuters) - U.S. oil output could start to take a hit by late 2015 due to low prices, OPEC said on Monday, suggesting the exporter group will have to wait beyond its next meeting in June to see if its strategy to defend market share will dent the shale oil boom.

The halving of oil prices since June 2014 has prompted spending cuts by oil companies and a drop in U.S. drilling, raising expectations of slowing output in countries outside the Organization of the Petroleum Exporting Countries (OPEC).

But in a monthly report, OPEC left its forecast for non-OPEC supply this year unchanged and said output of U.S. "tight" oil, also known as shale, might only start to be curbed towards the end of the year.

"Tight crude producers are aware that typical oil wells in shale plays decline 60 percent annually, and that losses can only be recouped by drilling new wells," OPEC said.

"As drilling subsides due to high costs and a potentially sustained low oil price, a drop in production can be expected to follow, possibly by late 2015."

Oil's LCOc collapse from $115 a barrel in 2014 gained impetus after OPEC refused to cut output at a November meeting, seeking to slow higher-cost production in the United States and elsewhere that had been eroding its market share.

OPEC holds its next meeting in June and comments from officials so far suggest it will not adjust policy as it waits for the strategy to take effect.

For now, OPEC forecast no further rise in demand for its crude in 2015, trimming the forecast slightly to 29.19 million bpd, and left unchanged its estimate of global growth in oil demand this year.   Continued...

 
A pumpjack brings oil to the surface  in the Monterey Shale, California, April 29, 2013.  REUTERS/Lucy Nicholson