Despite record-breaking gains in the Permian, strong demand growth and heightened geopolitical risk pushed Brent to USD80/bbl in May. For the market to truly rebalance, OPEC will remain key to price recovery over the short to medium term.
As outlined in our Macro Oils Long-Term Outlook H1 2018, the US Lower 48 can expect ongoing strong performance. We anticipate crude and condensate production to reach a plateau of around 11 million b/d in the mid to late-2020s, adding 4.2 million b/d to global supply by 2025.
Outside the US, Brazil and Canada are adding the most non-OPEC production by 2030.
A strong pipeline of pre-salt developments will lead Brazil's production to grow each year to 2030 by an average of 130,000 b/d, while Canada’s production continues to rise from oil sands projects. Over the next decade, we can expect output to increase a further 750,000 b/d.
Elsewhere, Russia's production increases into the early 2020s before reverting to decline. Some mature provinces, such as the North Sea, will be able to maintain output levels into the mid-2020s. New producers including Guyana, Uganda and Kenya will begin to add significant volume, which will help counter structural declines from mature producers — notably China, Indonesia, Colombia and Mexico — through 2030.
We expect total non-OPEC liquids production to lose its growth momentum and decline post-2030.
With demand continuing to grow through to its peak in the mid-2030s, the industry must find increasingly expensive oil to offset declines from a maturing asset base. However, as reliance on OPEC ramps up, so does the importance of geopolitical risk as a key determinant for both supply and price.