US shale boom to hit OPEC prices over next 5 years: IEA

The European regulator yesterday raided the offices of oil giants including Royal Dutch Shell, BP and Statoil over concerns that they colluded in manipulating the oil price benchmark for over a decade in the over $3 trillion-a-year global oil market.

North American shale output would account for 40 per cent of new supplies to 2018 with the development of light, tight oil and oil sands, while the contribution from the Organization of Petroleum Exporting Countries would be down to 30 per cent, according to the IEA.

The IEA cut global fuel demand estimates for the next four years, and predicted that consumption in emerging economies would overtake developed nations this year.

''The supply shock created by a surge in North American oil production will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15,'' the Paris-based adviser to 28 oil-consuming nations said in its medium-term market report today.
 
The IEA said, the development of US shale resources, which had led to peak levels of energy independence in two decades, was creating a ''chain reaction'' in the global transportation, processing and storage of oil that may escalate as other countries try to replicate the American oil boom.

Crude futures for settlement in 2018 were trading at a discount to current prices, indicating higher supplies and lower demand.

The price of oil fell below $95 a barrel on Tuesday with the IEA raising its US oil production forecasts and cutting its prediction for global crude demand.

Benchmark oil for June delivery was down 44 cents in Europe to $94.73 a barrel in electronic trading on the New York Mercantile Exchange. The contract was down  87 cents to finish at $95.17 a barrel on the Nymex on Monday.

The EC said that the alleged price collusion, which may have been going on since 2002, could have had a "huge impact" on the price of petrol at the pumps "potentially harming final consumers."

"Following several years of stronger-than-expected North American supply growth, the shockwaves of rising United States shale gas and light tight oil (LTO) and Canadian oil sands production are reaching virtually all recesses of the global oil market," the IEA said in its in its medium-term market report.

"The supply shock created by a surge in North American oil production will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15."

IEA executive director, Maria van der Hoeven said, North America had set off a supply shock that was sending ripples throughout the world. She added, the good news was that this was helping to ease a market that was relatively tight for several years.

She said the technology that unlocked the bonanza in places like North Dakota could and would be applied elsewhere, potentially leading to a broad reassessment of reserves.