A leaked draft of OPEC’s long term strategy report found that non-OPEC production will keep growing until 2017 as unconventional drillers continue to tough out low prices.
According to a draft of OPEC’s long term strategy seen by Reuters, the group anticipates output from non-OPEC members to continue growing at least until 2017 despite low prices.
The strategy, published every five years, found that demand for OPEC oil will drop from 30 million barrels per day in 2014 to 28.2 million barrels per day in 2017.
“Since June 2014, oil prices have experienced a significant reduction, reaching levels even lower than the crisis experienced in 2008, yet non-OPEC supply is still showing some growth,” the report said.
OPEC has been reluctant to cut its production target despite a nearly 50 percent fall in crude prices since last summer.
Saudi Arabia, the largest OPEC producer, has repeatedly defended the target as it takes advantage of low prices to squeeze out smaller producers and win market share.
“Generally speaking, for non-OPEC fields already in production, even a severe low price environment will not result in production cuts, since high-cost producers will always seek to cover a part of their operating costs,” the OPEC report said.
Despite falling U.S. rig counts, the relatively low costs of shale drilling has made production more resilient to price volatility than initially anticipated.
OPEC expects technological improvements in the shale gas, tight oil and oil sands sectors to push global production growth to 6 percent per year and account for 45 percent of production growth until 2035.
“The world’s liquids resources are sufficient to meet any expected increase in demand over the next few decades,” the report said.
According to the report, low prices are not expected to put curb non-OPEC production during the next two years.
“Generally speaking, for non-OPEC fields already in production, even a severe low price environment will not result in production cuts, since high-cost producers will always seek to cover a part of their operating costs,” the report said.
Low demand has also played a role in the oil price rout.
However, according to the report, demand for OPEC oil will start to grow again after 2019 and will reach 40 million bpd in 2040.
The report is assembled by OPEC’s Vienna-based research team and does not necessarily reflect the final position OPEC will take at its next meeting.
Last week, Iran’s deputy oil minister said OPEC is unlikely to change its production target from its current level of 30 million bpd.
OPEC is scheduled to meet on June 5 in Vienna.