Will the oil market equilibrium squeeze out Saudi Arabia's production?
If we believe the forecasts made by OPEC in November 2019, US oil production will increase by 4.2 million barrels per day between 2019 and 2024, 3.6 million of which will come from shale oil production. The other non-OPEC oil producing countries are expected to increase their production, still from 2019 to 2024, by 3.8 million barrels per day (mainly from Canada and Latin America). This should give rise to a structural excess of oil supply over demand from 2020, and, without any reaction from OPEC, a fall in the oil price, especially if measures are taken to reduce CO 2 emissions. To keep the equilibrium oil price above 60 dollars per barrel (for Brent), the only solution would be for OPEC to reduce its production, which in practice means to reduce Saudi Arabia's production by around 3 million barrels per day, and even more if OECD countries decide to comply with international climate agreements. But can we believe that Saudi Arabia will accept to lose 30% of its oil production in five years in the long-run scenario, and much more so in the scenario of meeting climate commitments?