US oil production will reach 14.2 million b/d by 2021 – IEA

US shale output expected to dip for next two years, then rise sharply as market rebalances

American oil production is forecast to rise to an all-time high of 14.2 million b/d by 2021, according to an International Energy Agency report released Monday.

US production will dip in the short-term, by 600,000 bpd this year and a further 200,000 bpd in 2017, before recovering as global oil markets rebalance and prices recover from their current lows around $30/b.

The IEA said “further improvements in operational efficiencies and cost cutting, allows production to resume its upward climb” and it expects the US to remain the largest contributor to supply growth until 2021, accounting for more than two-thirds of the net non-OPEC increase.

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“Anybody who believes that we have seen the last of rising LTO (light tight oil) production in the United States should think again; by the end of our forecast in 2021, total U.S. liquids production will have increased by a net 1.3 million bpd compared to 2015,” the IEA said.

The report says the expected temporary decline in American shale oil production may nudge the market into balance in 2017 after several years of huge inventory surpluses, now estimated to be around 1.5 million b/d.

“Only in 2017 will we finally see oil supply and demand aligned, but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices when the market, having balanced, then starts to draw down those stocks,” the IEA said in its report.

Oil production in the United States will reach a record high by 2021 as efficiency gains help domestic producers to combat the low prices that are likely to force hefty output cuts this year and next, the International Energy Agency (IEA) said on Monday.

After an initial dip this year and next, U.S. output is expected to climb to 14.2 million barrels per day (bpd), the IEA said in its medium-term outlook, citing the “free-for-all” that has come to characterize today’s oil market.

U.S. shale oil was the main target of OPEC’s 15-month-old policy to pump as much crude as possible to claw back market share after the boom in so-called light, tight oil (LTO).

Production of shale oil is expected to drop by 600,000 bpd this year and a further 200,000 bpd in 2017 before recovering to 5 million bpd in 2021. That would be an increase of 770,000 bpd from 2015 output.

“Anybody who believes that we have seen the last of rising LTO production in the United States should think again; by the end of our forecast in 2021, total U.S. liquids production will have increased by a net 1.3 million bpd compared to 2015,” the IEA said.

The extent of the temporary decline in U.S. shale oil production is likely to be such that it could help to nudge the market into balance in 2017 after several years of huge surpluses.

“Only in 2017 will we finally see oil supply and demand aligned, but the enormous stocksbeing accumulated will act as a dampener on the pace of recovery in oil prices when the market, having balanced, then starts to draw down those stocks,” the IEA said in its report.

“In today’s oil world, anybody who can produce oil sells as much as possible for whatever price can be achieved,” the agency is quoted by Reuters as saying.

“Just a few years ago such a free-for-all would have been unimaginable, but today it is the reality and we must get used to it, unless the producers build on the recent announcement and change their output maximisation strategy.”