“The US and OPEC together still only account for a little over 50 percent of global oil production. Therefore, the behavior of Russia and the multitude of medium and smaller producers could have almost as big an impact on the oil market as developments in OPEC and the US,” the report said.
So far, output in the other major oil producers (Kazakhstan, Brazil, Mexico, Canada, China, Russia), which Capital Economics define as the six countries outside the US and OPEC which pump over one million barrels per day, has been steady.
This is not particularly surprising as much of the production in these countries is conventional and offshore, Pugh said.
“This type of output requires a large amount of initial investment, but the wells then produce for many years or even decades at little additional cost. Therefore it makes sense to continue producing as long as the oil price is high enough to cover the variable costs of production,” Pugh said in a report. The main exceptions are Brazil and Canada.
The largest impact on non-OPEC oil production is likely to be felt in the next few years, economist believes.
“The slump in oil prices led to a flurry of announcements about dramatic cuts in investment in exploration and production, as well as the cancellation of projects which were at an early stage. What’s more, projects designed to extend the life of aging fields and maintain or even increase production are also being cancelled. This is likely to reduce growth in oil production over the next few years,” the report said.
Indeed, the stagnation of oil production outside OPEC and the US should give some additional support to prices over the next few years, Pugh said.
Non-OPEC oil supply is forecast to grow by 0.68 million barrels per day (bpd) in 2015 to average 57.17 million bpd, according to the OPEC’s latest oil market report.
Non-OPEC oil supply growth in 2015 is expected to increase, mostly in the first half of 2015, on a y-o-y (year over year) basis, but at a slower pace.
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