The US is on course to scale up its crude oil production by 10 per cent this year to about 11 million barrels a day, on the back of rising shale oil output, a research study has said. Surging shale oil volumes should allow the US to dethrone Russia and Saudi Arabia as the planet’s leading crude oil producer. The US hasn’t been the global leader, nor ahead of both Russia and Saudi Arabia, since 1975.
“The market has completely changed due to the US shale machine,” said Nadia Martin Wiggen, Rystad’s vice president of markets. The prediction shows how the fracking revolution has turned America into an energy powerhouse — a transformation that President Donald Trump has vowed to accelerate by cutting regulation.
This long-term shift has allowed the US to be less reliant on foreign oil, including from the turbulent Middle East, CNN Money reported citing research firm Rystad Energy. US oil production slipped — but didn’t completely collapse — after Saudi-led OPEC launched a price war in late 2015 aimed at reclaiming market share lost to shale and other players. A massive supply glut caused crude to crash from around USD 100 a barrel to a low of USD 26. Cheap prices forced shale companies in Texas, North Dakota and elsewhere to dial back. Domestic output bottomed at 8.55 million barrels per day in September 2016, down 11 per cent from the recent peak in April 2015, according to the US Energy Information Administration. But the resilient oil industry, led by the shale hotbed of the Permian Basin of Western Texas, rebounded nicely last year. The comeback was driven by higher crude prices as well as new technology that makes it cheaper and easier to frack.
The EIA recently forecasted that US crude oil production would jump to an average of 10 million barrels per day in 2018. That would take out the previous annual record of 9.6 million barrels set in 1970. Rystad Energy is even bullish on American oil. The Norwegian firm sees US crude output hitting 11 million barrels per day by December, narrowly surpassing global leader Russia and OPEC kingpin Saudi Arabia. Crude climbed above USD 61 a barrel yesterday for the first time over two years. The recent bump in prices has been driven by a pipeline explosion in Libya and protests in Iran. The oil rebound has been caused by solid demand and the whittling down of the epic supply glut that caused prices to crash in the first place. A big key behind fixing the oversupply problem has been OPEC and Russia dialing back their pumping.
In late November, OPEC and Russia agreed to extend oil production cuts until the end of 2018. The production cuts have helped stabilise oil prices, paving the way for US shale output to ramp up. By contrast, Trump has vowed to usher in an era of “American energy dominance,” in part by reducing red tape around oil drilling. Rystad Energy said market forces, not deregulation, has underpinned the upswing in US oil output. “I don’t think it’s had a significant impact,” Rystad’s Martin Wiggen said of Trump’s efforts to roll back environmental regulations. She added though that there is “not a fear under the Trump administration that he will suddenly outlaw shale.” Regardless of the driver, the ramp-up in oil pumping has lessened the need for the US to rely on oil from unstable places like Venezuela and the Middle East.
“The fact that the US produces more oil is a fantastic development in terms of security,” said Martin Wiggen. US oil imports have dropped by 25 per cent over the past nine years, according to the EIA. At the same time, US oil exports have flourished since the 40-year ban on shipping crude overseas was lifted in 2015. Exports have more than tripled over the past year to record highs. The US still imports more oil than it exports, but that gap is shrinking.