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Oil Production Redefines US’s Role in Global Crude Market

March 1, 2016 By Jennifer Hermes

6 for 2016
This article is sponsored by Schneider Electric.

Oil production in the US – after playing a central role in the steep decline of oil prices over the last year – will redefine its role in the global crude market, with the US expected to replace OPEC as the world’s swing producer guiding global prices, predicts Schneider Electric in a new report, 6 for 2016: Global Energy Market Trends. Along with that prediction, a number of other trends are expected to move the energy needle in tremendous ways, not just in 2016 but beyond. These trends indicate momentous change in dynamics within the global market, Schneider Electric says.

The convergence of various energy and environmental disciplines has led to today’s quickly evolving energy landscape, making it increasingly difficult for organizations to know what will actually impact their businesses. Other trends that could inform the way companies are purchasing and using energy in 2016 include the following:

  • Tomorrow’s carbon goals are shaping today’s energy supply: The recent COP21 summit signaled a major change – the desire of almost every nation to pursue a path of global carbon reduction and sustainability. Today, carbon markets are structured so that organizations can attain their sustainability goals, and this is redefining the economics of energy supply.
  • Europe pushes for power interconnectivity to reduce price uncertainty: Today’s European power markets are evolving as they work to achieve the European Union’s vision of interconnectivity. This newly formed interconnectivity will change the way markets are analyzed, going beyond standard fundamentals, to also consider the rate at which these power markets can adapt and change.
  • Brazil’s alternating current and the global cyclical climate create uncertainty: The El Niño climate event, which has returned in force, alters temperatures and rainfall patterns on a global scale. As Brazil is deep in drought, El Niño’s presence is unlikely to bring much needed rainfall, which will in turn keep Brazilian electricity prices elevated.
  • China transforms energy markets with coal, currency and crude: In recent years, China has been a global demand growth leader for a range of energy commodities. As markets nervously assess the potential slowdown of the world’s leading emerging market, China’s once reliable demand growth is uncertain, and the outcome could single-handedly prevent or encourage a recovery in global crude and commodity prices.
  • Global LNG export capacity expands: Over the next few years, global LNG export capacity is set to increase dramatically. However, the demand outlook for key markets is sluggish, and should result in limited risk to the US gas market in the near-term; long-term global supply and demand variables put export numbers in question for the next several years.

The energy markets throughout the world will continue to rely on and impact each other. Having a complete understanding of what those relationships mean to your enterprise could impact the way you secure energy supply and how you monitor consumption in 2016, writes Schneider Electric in the report.

2 comments on “Oil Production Redefines US’s Role in Global Crude Market

  1. “…US expected to replace OPEC…”

    I never thought I would hear this statement in my lifetime, despite being around for the past 52 years. And we can thank horizontal drilling + hydraulic fracturing technology for this.

  2. As today’s Wall St. Journal reports, OPEC is currently driving the U.S., which needs high prices to support the costly fracking technology, out of the market. I suggest sticking with the IEA’s World Energy Outlook for guidance on global energy market trends.

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