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- The U.S. Energy Information Administration forecasts non-OPEC crude oil production to increase by 1.8 million barrels per day this year.
- OPEC+ has maintained output cuts for three years, reducing its global market share from 53% in 2016 to 47% in 2024.
- Global crude inventories are shrinking, with OECD stocks falling below the five-year average.
Crude oil production in countries that are not members of OPEC is set to account for most of global supply growth both this year and next. That’s according to the U.S. Energy Information Administration, which saw non-OPEC growth at an impressive 1.8 million barrels daily for this year and 1 million daily next year. OPEC may have a problem with that.
OPEC and its partners in OPEC+ led by Russia have been withholding a substantial portion of their combined oil production for going on three years—an amount close to 6 million barrels daily in total, equal to some 5.7% of global supply, according to Reuters. This has helped keep international prices relatively high, motivating more drilling in non-OPEC countries. The question now, with such forecasts, is how much longer OPEC and its OPEC+ friends will keep curbing their own output—and market share—benefiting their rivals outside the cartel?
According to the Energy Information Administration, oil production outside OPEC last year added 1.8 million barrels daily—the same amount of supply the EIA believes non-OPEC producers will add this year as well. This supply growth will be led by the United States, Canada, Guyana, and Brazil. OPEC supply, meanwhile, will only add some 100,000 barrels daily this year and another 600,000 bpd in 2026, per this forecast.
Now, it is a fact that OPEC—and OPEC+—have shown impressive restraint with production these past three years. In the past, they would have already opened the taps to drown the competition. This restraint seems to have convinced forecasters that a reversal of that policy is quite unlikely, and rightly so. OPEC officials have consistently repeated that the group has no plans to change tack, regardless of whether it is the International Energy Agency asking them to boost production or the U.S. president. Yet non-OPEC supply keeps growing while OPEC supply stays curbed.
According to the International Energy Agency’s latest monthly oil report, global oil supply is set to expand by 1.6 million barrels daily this year, “with gains led by the Americas.” That means the United States, Canada, Brazil, and Guyana again. Yet the EIA, for one, and U.S. oil executives, for another, do not seem to expect big production moves in the U.S. due to prices—and any substantial increase in other non-OPEC producers would affect these as well, ultimately countering the supply predictions by both the EIA and the IEA.
Stocks, meanwhile, continue to shrink, and it may well be this fact that is helping OPEC and OPEC+ stick to their production cuts, in the belief that sooner or later, the reality of melting global oil inventories will assert itself among traders and change their betting behavior.
The IEA said in its February Oil Market Report that in January alone, global crude oil stocks took a plunge of 950,000 barrels daily amid stronger, seasonally driven demand, which coincided with supply declines in Nigeria and Libya. The agency then added that supply during that month was still 1.9 million bpd higher than a year earlier. That sounds like all is well, yet the IEA also mentioned that OECD crude stocks dropped by 63.5 million barrels in December, with industry inventories specifically falling to 91.1 million below the five-year average. That does not really sound like all is well—and it may be one of the things keeping OPEC+ from opening those taps, because OPEC+ has seen its market share shrink over the past ten years, and that is not something to be taken lightly.
Per the EIA, OPEC+ had a combined market share of 53% in 2016, when the broader producer group was formed. In 2024, that share had fallen to 47% because of the cuts and growing competition. This year, the EIA sees OPEC+’s market share decline further by a percentage point. It’s a slow but steady erosion that the group might want to address at some point. It probably will, but options are limited—and risky.
OPEC has, in the past, reacted to competition by flooding the market with crude. It worked, too, until it didn’t, when Saudi Arabia and Russia last had a disagreement on production policies, and the Saudis launched the shortest oil price war in modern times, which led to a 65% drop in oil prices, helped significantly by pandemic demand destruction since it happened in spring 2020. That price war ended by setting the stage for the creation of OPEC+.
The Saudis’ price wars on U.S. shale were more successful due to the sensitivity of shale drillers to price swings and their generally higher production costs. This is certainly something to consider in future efforts to keep prices high enough for OPEC’s budgets—and stop the erosion of market share. Whether OPEC and OPEC+ would risk a price war, however, remains highly uncertain until they really have no other option.
By Irina Slav for Oilprice.com
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The post Will OPEC Sit Back as Non-OPEC Oil Gains Ground? appeared first on Energy News Beat.
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