Global crude demand to hinge on OPEC's spare capacity: APA Corp. execs

Support for crude markets is hinging on OPEC's spare capacity as global demand continues to grow, APA Corp. executives said Aug. 19, while US production is expected to slow down in the near term.

"If the Permian starts to flatten, US production growth will moderate in coming years, putting a lot of power in OPECs hands," Ben Rodgers, APA Corp.'s senior vice president of finance, said during EnerCom's Energy Investment Conference in Denver, Colorado, Aug. 19.

APA, the Houston-based exploration and production company, expects global oil demand to continue to grow in the coming years, but near-term demand uncertainties had investors "skeptical," Rodgers said.

Despite a recent uptick in crude prices, speculative positioning was nearing an all-time low as it failed to rally the market, according to APA, indicating the market still had a bearish outlook.

APA was looking to OPEC's decision on renewing supply additions, Rodgers noted, adding that "if OPEC brings back supply, it'll be more supportive for prices."

OPEC's spare capacity was on a downturn as demand increased, with Saudi Arabia and the UAE specifically accounting for over 80% of the oil group's non-sanctioned spare capacity.

Saudia Arabia and the UAE's spare capacity has remained flat between 2023 and 2024, according to APA, totaling 4.5 million b/d, indicating that supply additions could ease the tight supply environment.

The US would not be able to account for increases in global demand as near-term crude production was plateauing, Rodgers said, putting more market pressure on the oil group.

Production per rig was slowing down with a decreasing backlog of DUC's in the Permian Basin, according to APA data. Additionally, there has not been a significant gain in efficiencies despite longer laterals and core acreage being developed, Rodgers said.

"The Permian Basin makes up 60% of any growth we anticipate in the US," Rodgers said, adding that they forecast less growth from the US overall as Bakken and Eagleford crude production was in decline.

The rig count was at 297 in the Permian the week to Aug. 7, down 31 from the year-ago period during the week to Aug. 9, 2023, according to S&P Global Commodity Insights data.