The Economy

U.S. Oil Production to Hit New Record in 2018

With the shale boom continuing, the IEA says the U.S. will overtake Saudi Arabia as the world's No. 2 producer.
Matthew HellerJanuary 19, 2018

The United States is on course to overtake Saudi Arabia as the world’s second-largest oil producer, with output expected to hit record levels this year, according to the International Energy Association.

U.S. crude production now stands at 9.9 million barrels per day, the country’s highest level in almost 50 years, and the IEA now expects a “record-setting” 2018.

“Short-cycle production from the U.S. is reacting to rising prices and we have raised our forecast for crude oil growth there in 2018” from 870,000 bpd to 1.1 million bpd, the association said in its latest Oil Market Report.

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That would take U.S. production past 10 million barrels a day, topping heavyweight Saudi Arabia and rivaling No. 1 producer Russia. “Relentless growth should see the U.S. hit historic highs … provided OPEC and non-OPEC restraints remain in place,” the IEA predicted.

Overall non-OPEC supply is expected to increase by 1.7 million barrels per day in 2018, up from 0.7 million bpd last year. U.S production rose by 0.6 million bpd in 2017 amid a surge in shale output.

OPEC and Russia started to restrict output in January 2017 after oil prices dropped as low as $30 per barrel. “One of the main beneficiaries of these cuts is the producers’ major competitor, U.S. shale oil,” CNBC noted. “U.S. oil producers are staging a dramatic comeback amid a recovering oil price that has allowed many of them to restart operations.”

“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,” CNBC added.

Global demand for oil was robust in 2017, but the IEA is keeping its demand growth estimate for 2018 unchanged at 1.3 million bpd, down from 1.6 million bpd in 2017, with total consumption expected at 99.1 million bpd.

The global oil market is moving closer to reaching “a healthy balance between supply and demand,” the IEA said, with “no clear sign yet of OPEC turning up the taps to cool down oil’s rally.”