U.S. Oil Production Tops 10 Million Barrels A Day for First Time Since 1970
Friday, February 02, 2018
U.S. oil production surpassed 10 million barrels a day in November for the first time in nearly 50 years, a milestone that underscores the growing dominance of the U.S. oil industry.
While global oil exporters once dismissed shale as a flash in the pan, the industry has emerged more efficient than ever from a three-year oil price rout and is poised to take advantage of prices that are at their highest levels since late 2014.
In November, production rose to 10.038 million barrels a day, 4% more than the previous month, according to the U.S. Energy Information Administration. That is just shy of the monthly record of 10.044 million barrels a day in November of 1970.
The resurgence of the U.S. shale industry is the latest turn in the tug of war between shale producers and the Organization of the Petroleum Exporting Countries, which last year coordinated an output cut with other major exporters, including Russia. The group has been trimming about 2% of global oil supply in a bid to work off a glut and raise prices.
The efforts have paid off: prices have surged this year amid tightening supplies and world-wide economic growth that stirred surprisingly strong demand.
The prospect of a flood of new output from shale wells has tempered oil rallies at times but hasn’t much diminished investor enthusiasm lately. U.S. oil prices rose more than 7% in January and have posted monthly gains for five straight months--their longest streak since 2011. On Wednesday, U.S. crude futures rose 23 cents to $64.73 a barrel on the New York Mercantile Exchange and Brent, the global benchmark, rose 3 cents to $69.05 a barrel on ICE Futures Europe.
The new data bolster a prediction made at the end of 2017 by Rystad Energy, a consulting firm that tracks production data. At that time Rystad said that the U.S. had already hit the 10 million barrel a day marker, citing strong shale output gains in October that were masked by the effects from hurricanes on Gulf of Mexico pumping.
As U.S. producers pump more, oil imports from foreign countries are shrinking to new lows and American crude exports are rising. The petroleum trade deficit in the U.S. was 2.5 million barrels a day at the end of the year when looking across all types of petroleum liquids, including fuels such as gasoline and diesel, Rystad said. That is down sharply from a peak petroleum deficit of 12.5 million barrels a day in 2007.
Rystad expects that gap to keep shrinking because West Texas Intermediate oil is trading at a big discount to Brent, the global crude benchmark price. That allows U.S. refineries to run full tilt on cheaper crude close to home, while also making it economical to ship oil abroad.
Over the last decade, U.S. output has roughly doubled as companies became experts in forcing oil from shale formations by drilling and fracking long horizontal wells.
The EIA and the International Energy Agency have both predicted that U.S. output will average more than 10 million barrels a day this year. The IEA predicted earlier this month that the U.S. is on pace pull ahead of Saudi Arabia, which last year produced just shy of 10 million barrels a day, and will vie with Russia, with output of 11 million barrels a day, to become the world’s top oil producer.