OPEC Warns US Shale Boom Set to Erode Crude Oil Demand

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By Chika Amanze-Nwachuku, with agency reports

The United States shale oil revolution is set to take a huge toll on Nigeria’s economy as the Organisation of Petroleum Exporting Countries (OPEC) predicted Wednesday that the world would need less of its crude in 2014 owing to competing supply sources.

Nigeria, a member of OPEC, is the fifth largest supplier of crude to the US and Western Europe. Nigeria’s economy is also heavily dependent on crude oil revenue, which accounts for more than 80 per cent of government revenues.

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, had in May, stated that the shale oil revolution was “one of the most serious threats” to Nigeria and other oil-producing nations.

The US, the world’s largest oil consumer, imported less than three million barrels of OPEC crude oil a day (mb/d) in February, the first time that has happened since January 1994, according to US government data.

The London-based Financial Times had previously reported that as the shale boom shrinks the US import market, Saudi Arabia and other Gulf states are suffering less than others in OPEC, in particular Nigeria and Angola.

Nigeria and Angola combined exported 0.6mb/d to the US in 2012, the lowest in 25 years, and an indication that the shale boom will soon erode oil demand from producing countries.

In its oil market report released Wednesday, OPEC, which supplies a third of the world’s crude oil, forecast that demand for its crude would slip by 300,000 barrels a day next year to 29.6 million barrels a day.

The figure, according to Bloomberg, represents about 2.6 per cent less than the volume the 12-member group is currently pumping.

The need for OPEC’s crude will diminish even as global oil demand growth recovers to one million barrels a day in 2014, from 800,000 a day this year, amid rising output in the US and Canada, the report added.

“The strong growth trend seen in 2013 is expected to continue in 2014 for production from outside OPEC,” the oil cartel said in its monthly market report.

Dependence on OPEC’s crude is slipping as the US and Canada unlock unconventional oil supplies from deep underground shale deposits with new drilling techniques.

Brent crude futures have slipped 2.7 per cent this year, trading at about $108 a barrel on the London-based ICE Futures Europe exchange Wednesday, amid signs of slowing growth in China and uneven recovery in the US, the world’s biggest oil consumers.

OPEC, however, predicted that world oil consumption would advance by one million barrels a day, or 1.2 per cent to 90.7 million next year as emerging nations expand and developed economies continue to recover.

Demand estimates for 2013 were however kept mostly unchanged, with an anticipated growth rate of about 800,000 barrels a day, or 0.9 per cent, to 89.6 million.