Crude output is growing from some producers that are not part of the oil cartel, Organization of Petroleum Exporting Countries (OPEC). The rise in non-OPEC supply, from players like Guyana, is outpacing demand growth, contributing to a surplus in the market that is weighing heavily on prices, as noted by S&P Global Commodity Insights experts during a recent Platts Oil Markets Podcast.
Chris van Moessner, Oil Futures Editor at S&P Global, said, “We’re now looking at futures settling at their lowest level since December 2021, if you can believe that.” He said that the increasing production from countries like the U.S., Canada, Guyana, and Brazil is leading to a mismatch between supply and demand expectations, contributing to the sharp price declines.
In response, OPEC has reduced its production targets multiple times. Moessner noted that OPEC, in its latest monthly report, trimmed its 2024 and 2025 demand outlooks, while also pushing back plans to increase production from October to December 2024.
Guyana is a standout contributor, having only started production for the first time in December 2019. Starr Spencer, Senior Upstream Editor at S&P Global, said Guyana’s crude production has risen to 650,000 barrels per day (b/d), surpassing initial capacity estimates due to debottlenecking efforts. Spencer added that the next significant project, Yellowtail, is expected to come online in late 2025. This will take production over 850,000 b/d.
The rising production from these non-OPEC countries comes at a time when demand, particularly from China, is falling. Despite China recording a 12-month high in crude imports in August, its year-on-year demand remains down by 7%, as explained by van Moessner. The lower-than-expected demand from China, combined with the growing supply from producers like Guyana, is placing downward pressure on global crude prices.
In Canada, new wells and expanded infrastructure, particularly the Trans Mountain Pipeline, are enabling further production growth. Laura Huchzermeyer, U.S. Crude Editor at S&P Global, noted that Canadian production is expected to rise to 5.6 million barrels per day by 2025, thanks to the newly added 590,000 b/d of pipeline capacity.
Brazil’s crude oil production, although temporarily impacted by maintenance activities for floating production, storage and offloading (FPSO) vessels at a few fields, and strikes earlier this year, is expected to rise. Jeff Mower, Director of Americas Oil News, noted that Brazil’s production, which was at 3.2 million b/d in July, is projected to increase to 3.7 million b/d by the end of 2025, as new FPSOs come online.
The U.S. remains a major driver of non-OPEC supply growth. Despite relatively stable rig activity, U.S. crude production continues to rise due to efficiencies and new developments, particularly in the Permian Basin and the Gulf of Mexico. Spencer highlighted that U.S. Gulf of Mexico production is set to increase from 1.8 million b/d to just under 2 million b/d by early 2025, largely due to the Chevron Anchor and Shell Whale projects coming online.
Overall, the growing supply from non-OPEC producers, coupled with weaker demand outlooks, is creating a bearish market trend.
