Oil & gas macro outlook: North America is shifting the supply needle

We continue to believe that the near- to medium-term outlook for crude oil prices is bearish. Non-OPEC controlled supply is growing strongly driven by North America, and barring unplanned outages should run ahead of modest global demand growth. The key wildcard is OPEC’s response to the growing supply pressure. It is worth noting in this context that Iraq has the freedom and probably the capacity to boost output, and Libya and Iran both wish to increase production as circumstances allow. Significantly, Saudi Arabia seems to be suggesting that it will not necessarily offset production gains elsewhere within OPEC. It also has no interest in providing a price umbrella for relatively high-cost non-OPEC producers.

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