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Shale oil supply contributes to cuts in OPEC demand forecast

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U.S. production of shale oil has captured the attention of the Organization of Petroleum Exporting Countries, or OPEC.

In the 12-nation group's World Oil Outlook 2012, released Nov. 8, shale oil production contributes to a reduction in the demand forecast for OPEC oil.

"This year a rise in the importance of shale oil is expected," the outlook reads, noting that past World Oil Outlook reference cases have not factored in significant shale oil supply.

In 2011, world supply of all petroleum liquids — mostly crude oil, but also natural gas liquids and gas-to-liquids — was 87.5 million barrels per day, or mb/d.

By 2016, the outlook for oil demand reaches 93.1 mb/d — down more than 1 mb/d from last year's outlook.

Supply shifts significantly in this medium-term forecast, with OPEC expecting to supply 36.7 mb/d of liquids in 2012 and, by 2016, only 36.4 mb/d. Non-OPEC liquids supply grows over the same period from 53.1 mb/d to 56.6 mb/d.

"The key sources of supply driving this growth are rising levels of shale oil from the US, Canadian oil sands, and crude oil from the Caspian and Brazil," the outlook reads.

Long term, to 2035, demand grows to 107.5 mb/d, a downward revision of more than 2 mb/d from 2011's outlook.

OPEC liquids supply grows to 44.9 mb/d in 2035 while non-OPEC supply grows to 62.7 mb/d.

Demand in developed countries peaked around 2005 and declines throughout the forecast period.

Probable limitations to shale oil production are noted, including environmental concerns, labor and equipment constraints, rising costs and steep well declines.

Nevertheless, the outlook's authors note, shale oil supply already is over 1 million barrels per day, and the reference case sees it climbing to 2 mb/d by 2020 and 3 mb/d by 2035.

The U.S. Energy Information Administration sees U.S. tight oil production, which includes oil from shale, chalk and other formations, increasing to a peak in 2029, then decreasing.

OPEC member countries account for four-fifths of the world's proven crude oil reserves, according to the outlook.

With some variation through the period, OPEC crude oil retains about a one-third share of all liquids, down from about half of all liquids in 1973.