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Page added on January 19, 2018

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‘Relentless’ growth could see the US topple Russia, Saudi Arabia as world’s largest oil producer

Production
  • “This year promises to be a record-setting one for the U.S.,” the IEA said in its closely-watched report published Friday
  • The latest monthly report from the IEA comes at a time when crude futures have climbed to highs not seen since the early days of a slump in December 2014
  • One of the main beneficiaries of OPEC-led production cuts is the producers’ major competitor, U.S. shale oil. U.S. oil producers are staging a dramatic comeback amid a recovering oil price that has allowed many of them to restart operations.

The U.S. is well-placed to overtake the likes of Saudi Arabia and Russia as the world’s leading energy producer over the next 12 months, according to the latest monthly report from the International Energy Agency (IEA).

“This year promises to be a record-setting one for the U.S.,” the IEA said in its closely-watched report published Friday.

“Relentless growth should see the U.S. hit historic highs above 10 million barrels a day (in production), overtaking Saudi Arabia and rivaling Russia during the course of 2018 — provided OPEC and non-OPEC restraints remain in place,” the Paris-based organization added.

‘Unchartered waters’

The latest monthly report from the IEA comes at a time when crude futures have climbed to highs not seen since the early days of a slump in December 2014. Brent crude futures hit a peak of $70.37 a barrel on Monday, with the global benchmark since paring some of its recent gains to trade at $68.69 on Friday morning.

“What we are trying to understand is the responsiveness of the U.S. shale producers. And because of the dynamism of the industry, the innovation and the vast number of players in that space … to some extent, we are in unchartered waters,” Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC on Friday.

Atkinson said that given the recent rally in oil prices, the IEA was expecting a “wave of new production” from the U.S. in the coming months. He added OPEC would then need to “accommodate” for that and make its own judgment at its next meeting in June as to what its response should be.

IEA predicts a slowdown in crude demand growth in 2018

IEA’s Atkinson: Low Venezuelan oil production hastens market rebalancing  

The main price driver has been a supply cut from major oil producing group OPEC and Russia, who started to withhold output in January last year. The production cuts by OPEC and 10 other allied producers, which are scheduled to last throughout 2018, are aimed at clearing a supply overhang and propping up prices.

One of the main beneficiaries of these cuts is the producers’ major competitor, U.S. shale oil. U.S. oil producers are staging a dramatic comeback amid a recovering oil price that has allowed many of them to restart operations.

US ‘beat all expectations’ in 2017

U.S. crude production stands at 9.9 million barrels a day, according to the IEA, which is the country’s highest level in almost 50 years. That level of supply puts the U.S. neck-and-neck with OPEC kingpin Saudi Arabia — the world’s second-largest producer after Russia.

“The stage was set for a strong expansion last year, when non-OPEC supply, led by the U.S., returned to growth of 0.7 million barrels a day and pushed up world production despite OPEC and non-OPEC cuts,” the IEA said.

“U.S. growth of 0.6 million barrels a day in 2017 beat all expectations, even with a moderate price response to the output deal as the shale industry bounced back — profiting from cost cuts, stepped up drilling activity and efficiency measures enforced during the downturn,” the group said.

A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

Brittany Sowacke | Bloomberg | Getty Images
A worker prepares to lift drills by pulley in the Permian basin outside of Midland, Texas.

In recent years, America’s unprecedented oil and gas boom has been driven by one factor above all others — and that’s shale. The so-called shale revolution could help to alleviate Washington’s reliance on foreign oil, including from turbulent Middle Eastern states, while also supporting a bid to export to more countries around the world.

The IEA’s estimates of global oil product demand in 2017 and 2018 were left roughly unchanged at 97.8 million barrels a day and 99.1 million barrels a day, respectively.

The price of oil collapsed from near $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production. OPEC’s reluctance to cut output was also seen as a key reason behind the fall. But, the oil cartel soon moved to curb production — along with other oil producing nations — in late 2016.

CNBC



24 Comments on "‘Relentless’ growth could see the US topple Russia, Saudi Arabia as world’s largest oil producer"

  1. GregT on Fri, 19th Jan 2018 11:39 am 

    “The so-called shale revolution could help to alleviate Washington’s reliance on foreign oil, including from turbulent Middle Eastern states, while also supporting a bid to export to more countries around the world.”

    Even at 9.9 MBPD, the US still needs to import over 10MBPD to meet domestic consumption.

  2. Antius on Fri, 19th Jan 2018 11:45 am 

    A significant rise in US interest rates would kill the US tight oil industry in its tracks.

    These people failed to make money when oil was over $100/bl. This Ponzi scheme only took off after the US dropped interest rates close to zero and essentially started giving away money for free. Practically anything is profitable when interest rates are zero, because you can always use free money to generate earnings even from the lowest grade resources.

  3. Jerome Purtzer on Fri, 19th Jan 2018 4:30 pm 

    Right on, Greg and Antius, you got it exactly right. We have a giant bubble just waiting for a pin to pop it when the music stops.

  4. Dredd on Fri, 19th Jan 2018 4:34 pm 

    There is more to it than the article lets on (First Shots Fired In The Currency Wars – 3).

  5. Boat on Fri, 19th Jan 2018 5:59 pm 

    Our first three posters think the US needs to net import 9.9mbpd. That number last week was around 3 mbpd and around 3.5 average mbpd for the last quarter. That other 6.4 mbpd is sold on the market as gas, diesel, etc. to other countries. Greggiet has been shown the charts many times and pegs the full-o-shyt meter per normal.

  6. onlooker on Fri, 19th Jan 2018 6:24 pm 

    Shale is one big fat fraud
    Why The Shale Oil “Miracle” Is Becoming A “Debacle”
    https://www.peakprosperity.com/blog/110440/why-shale-oil-miracle-becoming-debacle

  7. MASTERMIND on Fri, 19th Jan 2018 6:28 pm 

    Contrary to much rhetoric around it, shale is not a recent discovery. Shale has a significant history, and one that clearly demonstrate the material realities on which it rests. Indeed, encouraging shale production was one response to the oil price shocks of the 1970s. Wanting to reduce American dependence on foreign oil, the Carter administration initiated a programme to develop ‘synfuels’ that focused first and foremost on shale.

    This shale project attracted significant investment from oil companies, and production began in the late 1970s in the Green River Formation, which straddles Colorado, Wyoming and Utah and contains the largest shale oil deposits in the world. But when the price of oil crashed in 1982 at a time of relatively high interest rates these projects were rendered unviable. (Hirsch et al. 2005) (Yergin 2012)

    -Thompson, Helen. Oil and the Western Economic Crisis

  8. MASTERMIND on Fri, 19th Jan 2018 6:29 pm 

    The US Shale Business is “not profitable” and can’t fund itself whether oil is at 100 or 50 dollars a barrel
    https://imgur.com/a/t7ulB

    MIT Technology Review: Shale Oil Will Boost U.S. Production, But It Won’t Bring Energy Independence
    https://www.technologyreview.com/s/507446/shale-oil-will-boost-us-production-but-it-wont-bring-energy-independence/

    The world’s largest oil trader Vitol says US oil production will peak in 2018
    https://www.reuters.com/article/us-commodities-summit-vitol/u-s-oil-output-may-be-set-for-last-spike-in-2018-vitol-idUSKBN1CF1MZ?rpc=401&

  9. Antius on Sat, 20th Jan 2018 3:16 am 

    “Contrary to much rhetoric around it, shale is not a recent discovery. Shale has a significant history, and one that clearly demonstrate the material realities on which it rests. Indeed, encouraging shale production was one response to the oil price shocks of the 1970s. Wanting to reduce American dependence on foreign oil, the Carter administration initiated a programme to develop ‘synfuels’ that focused first and foremost on shale.”

    Just to be clear here, the terminology used has confused a lot of people. When we say ‘shale oil’ what we actually mean is ‘tight oil’ which is small pockets of light free flowing hydrocarbons trapped in a moderately porous medium. This must be shattered using hydraulic shock waves to increase its porosity. Given that porosity remains poor and there isn’t usually a lot of well pressure, individual wells have very high depletion rates.

    ‘Oil shale’ is a completely different resource to ‘Tight oil’. It consists of a tar like kerogen rich source rock that never entered the hot zone and therefore never got cooked into lighter hydrocarbons. It cannot be pumped as it is a solid and must be mined like coal.

    Two completely different things. When we say ‘shale oil’ we usually mean ‘tight oil’ not ‘oil shale’. The terminology confuses the hell out of a lot of people.

  10. Mad Kat on Sat, 20th Jan 2018 3:45 am 

    Shale oil is the last gasp of a desperate country. The headline is a sad joke.

    I lived in an oil shale area in PA. When we dug the basement for our home there, it was in oily shale. It made the soft, muddy brown shale slippery and crumbly.

  11. Davy on Sat, 20th Jan 2018 7:06 am 

    Shale oil has saved our asses from tight oil supply situations that threatened 10 years ago. It has continue to alleviate peak oil decline. It has proven a good source of liquids to mix with other conventional and it is this mixing that has made a significant difference to oil supply. How long it can last is the big question economically and geologically. There are many here who hammer oil shale economically but the exact financial situation is unclear. The debt situation is no worse than many other sectors of the global economy. Look at China and its loss making heavy industry. We have a world of malinvestment and shale is part of it but a vital part. We need the extra liquid fuels and the opportunity for more is there. How long this can last systematically on the civilizational level with the all-important realities of EROI is another story. Yet, like climate change civilizational EROI issues play out over long time frames.

    It is possible that peak oil demand partly from the acceleration of renewable energy penetration in all aspects of primary energy will buy us time before the really bad power down begins. Maybe we will have a systematic economic decline that frees up enough oil to power us on by freeing up supply to avoid a demand crunch. Hopefully this decline is not too severe. A business cycle is ahead despite the global Ponzi game we have today. This Ponzi will end because they always do. We must admit oil consumption growth cannot go on much longer especially with an economic decline. The oil consumption rate of growth has already turned weak. We are going to hit a point where consumption growth will end. It is a finite planet with a civilization in debt dysfunction. This process is too big to understand fully. There is no way to know for sure if the economics and the technology of an energy transformation can occur. Despite what so many want to say peak oil dynamics are alive and well. The liquids are there but there is much more to it than the liquids.

    We are just now past the end of the beginning of what could be a renewable transformation and the economy is still there to help build it. Maybe storage strategies will develop and EV’s can be engineered to succeed. Maybe we can make some significant behavioral changes with demand management. I seriously doubt a energy transition to renewables is possible but a transformation is possible. These are a lot of “maybes” and “hopes”. In the meantime there are all these unconventionals to stave off liquid fuel issues. Let’s hope that all the maybes’ occur because the unconventionals are not economically viable in an economy that is collapsing. We are close to an economic correction and it is unclear if the unconventionals will survive that.

  12. Anonymous on Sat, 20th Jan 2018 8:00 am 

    Greg:

    US net imports of crude and products is ~4 MM bopd.

    https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTNTUS2&f=M

  13. Davy on Sat, 20th Jan 2018 8:06 am 

    Nony, grehg get carried away with his anti-American agenda often at night when he is drinking is Ale.

  14. MASTERMIND on Sat, 20th Jan 2018 9:16 am 

    Davy

    How long it can last is the big question economically and geologically. There are many here who hammer oil shale economically but the exact financial situation is unclear.

    Oh really
    https://imgur.com/a/t7ulB

    And according to the worlds largest oil trader they will peak this year. And according to the IEA and Saudis we have oil supply shortages coming by 2020…Maybe you wouldnt have so many questions if you would shut up and listen to the experts…But I know everyone on this sub thinks they are experts and can ignore the real ones.

  15. Anonymous on Sat, 20th Jan 2018 9:32 am 

    If US grows 2 MM bopd through end 2019 and adds 1 MM bpd of NGLs (a large part of which becomes “products” exports, all the C3+ and part of the C2), you could see crude and products net imports going negative (i.e. US doing net exports). Even if not averaging negative, getting close enough so individual months (from random variation) would flip to net exports. This will make headline, the first month, we have a net export.

    Not saying it will happen. For one, price is a huge caveat as US oil needs something north of ~$50 to grow. On the other hand, Persian Gulf countries (SA, KUW, UAE, Irag/n) can expand production at $20 or lower. But the point is not that it WILL happen. But that it is not a crazy concept.

    I would recommend to consider the discussions we had here about US natural gas. Lot of blabla on this forum about how gas could not grow, we could not export, etc. since we were still a net importer AT THAT TIME. Well…look at it now. 2017 was a net export year for US gas. And 2018 will increase that.

    https://www.eia.gov/dnav/ng/hist/n9180us1m.htm

  16. Davy on Sat, 20th Jan 2018 10:07 am 

    Nony, quiet, the anti-Americans here will be gnashing their teeth and ripping at their hair.

    This is one of the most interesting of topics in the last 10 years I never thought would have occured. I thought this fracking technology would maintain supply but I never thought we would see net import fall so much as is the case.

  17. JuanP on Sat, 20th Jan 2018 10:39 am 

    Mm, Oil shale and shale oil are two very different things.

  18. JuanP on Sat, 20th Jan 2018 10:43 am 

    Mm, Antius clarified the point above. We all got confused by those terms at some point. Sometimes I wonder if they used those terms on purpose to confuse people.

  19. GregT on Sat, 20th Jan 2018 11:52 am 

    Nony’s EIA link is for ‘petroleum and other liquids’, not crude oil. They are also very different things.

    The article is talking about American oil production, not refinement, and is highly misleading. If not for central bank policies, and exponentially growing mountains of debt, the ‘shale revolution’ would have been DOA.

    There is nothing anti-American about it.

  20. GregT on Sat, 20th Jan 2018 12:00 pm 

    The article states:
    “The price of oil collapsed from near $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production.”

    Which is also highly misleading. Oil prices post ‘shale revolution’ have been over 200% higher, than prices throughout the last hundred years, during non-recessionary periods, in inflation adjusted US dollars.
    More of the same MSM propaganda.

  21. Anonymous on Sat, 20th Jan 2018 12:31 pm 

    It’s not just crude and other liquids, Greg, it is crude and products. We are actually a net exporter of gasoline for instance. If we import crude, refine it to gasoline and then export the gasoline, we are not consuming that.

    When you talk about the US consuming ~18 MM bopd, you need to realize that we don’t consume those 18 MM bpd domestically. We only consume about 14 MM bpd. So there is 4 MM bpd for export that is excess products. Rockman has explained this time after time.

    These are rough numbers (varies a little month to month), but you have about:

    Supply:

    10 MM bpd oil domestic production
    8 MM bpd oil imports (net)
    ———-
    18 MM bpd oil supply

    Refining:
    18 MM bpd refining capacity
    14 MM bpd domestic consumption
    ———–
    4 MM bpd exports

    Total net imports of crude and refined products:

    8 MM bpd crude import (net)
    4 MM bpd refined products export
    ——-
    4 MM bpd net imports of crude and product

    P.s. The numbers are approximate, rounded, etc. And vary a little from month to month. But this is close to what is happening.

  22. MASTERMIND on Sat, 20th Jan 2018 3:46 pm 

    Annymouse

    Rockman is a total fucking idiot who sites daily calller as his sources..And he never sites any source just like you don’t…Just a blathering blowhard! And shale is a ponzi scheme that should be shut down by the Nevada gaming commission.

  23. Cloggie on Sat, 20th Jan 2018 9:08 pm 

    He is not a coward dropout like you, millimind. And he knows what he is talking about, unlike the site’s pear reviewed village idiot and his tiny repertoire of five obsolete 2010 links that needs to be spammed in every thread for no other reason than to convince yourself that your running away from real responsibilities is justified and that you should live on somebodies else his/her purse instead of making yourself useful as a chemist for instance in the field of storage of renewable energy.

  24. MASTERMIND on Sat, 20th Jan 2018 10:36 pm 

    Clogg

    Which one of my five article are from 2010?

    http://www.sciencedirect.com/science/article/pii/S0921800914000615
    http://www.sciencedirect.com/science/article/pii/S0959652617304225?via%3Dihub
    https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3574335/
    http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf
    http://www.feasta.org/2012/06/17/trade-off-financial-system-supply-chain-cross-contagion-a-study-in-global-systemic-collapse/

    Another Clogg lie debunked! Just like his solar and wind powered delusions of one percent! LOL How much are they paying you clogg? I can tell they have really low standards these days! But a mans got to work even if its from his mothers basement! So carry on my friend! I will just keep destroying your every argument with facts and peer reviewed scientific studies!

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