Re-Blogged From Newsmax
The U.S. government sees oil production further climbing next year even amid transportation logjams in the country’s most prolific shale play.
The Energy Information Administration sees U.S. crude output averaging 11.8 million barrels a day in 2019, up from its 11.76 million barrel a day estimate in the June outlook.
“In 2019, EIA forecasts that the United States will average nearly 12 million barrels of crude oil production per day,” said Linda Capuano, Administrator of the EIA. “If the forecast holds, that would make the U.S. the world’s leading producer of crude.”
U.S. crude output has remained above the 10-million-barrel a day mark since February. That’s while Saudi Arabia told OPEC it pumped about 10.5 million barrels of crude a day last month as the kingdom sought to cap rallying prices by ramping up output, according to people familiar with the matter.
Concerns linger over the worsening bottleneck in the biggest U.S. shale region, the Permian Basin, and how that might affect domestic output in the second half of the year. Due to limited pipeline transportation in the region, production may start to slow in the area, according to Scott Sheffield, the chairman of Pioneer Natural Resources Co. “We will reach capacity in the next 3 to 4 months,” he said in June.
The EIA left its average domestic output forecast for this year unchanged at 10.79 million barrels a day, above the 1970 record of 9.6 million a day, according to the agency’s Short-Term Energy Outlook released on Tuesday. Its global crude production forecast for next year was raised to 102.54 million barrels a day from a previous forecast of 102.21 million a day. The agency’s world demand growth estimate for 2019 was lowered.
Saudi Arabia and Russia could upend that forecast by boosting their own production. In the face of rising global oil prices, members of the OPEC cartel and a few non-members including Russia agreed last month to ease production caps that had contributed to the run-up in prices.
President Donald Trump has urged the Saudis to pump more oil to contain rising prices. He tweeted on June 30 that King Salman agreed to boost production “maybe up to 2,000,000 barrels.” The White House later clarified that the king said his country has a reserve of 2 million barrels a day that could be tapped “if and when necessary.”
The idea that the U.S. could ever again become the world’s top oil producer once seemed preposterous.
“A decade ago the only question was how fast would U.S. production go down,” said Daniel Yergin, author of several books about the oil industry including a history, “The Prize.” The rebound of U.S. output “has made a huge difference. If this had not happened, we would have had a severe shortage of world oil,” he said.
The United States led the world in oil production for much of the 20th century, but the Soviet Union surpassed America in 1974, and Saudi Arabia did the same in 1976, according to Energy Department figures.
By the end of the 1970s the USSR was producing one-third more oil than the U.S.; by the end of the 1980s, Soviet output was nearly double that of the U.S.
The last decade or so has seen a revolution in American energy production, however, led by techniques including hydraulic fracturing, or fracking, and horizontal drilling.
Those innovations — and the breakup of the Soviet Union — helped the U.S. narrow the gap. Last year, Russia produced more than 10.3 million barrels a day, Saudi Arabia pumped just under 10 million, and the U.S. came in under 9.4 million barrels a day, according to U.S. government figures.
The U.S. has been pumping more than 10 million barrels a day on average since February, and probably pumped about 10.9 million barrels a day in June, up from 10.8 million in May, the energy agency said Tuesday in its latest short-term outlook.
Capuano’s agency forecast that U.S. crude output will average 10.8 million barrels a day for all of 2018 and 11.8 million barrels a day in 2019. The current U.S. record for a full year is 9.6 million barrels a day in 1970.
The trend of rising U.S. output prompted Fatih Birol, executive director of the International Energy Agency, to predict this spring that the U.S. would leapfrog Russia and become the world’s largest producer by next year — if not sooner.
One potential obstacle for U.S. drillers is a bottleneck of pipeline capacity to ship oil from the Permian Basin of Texas and New Mexico to ports and refineries.
“They are growing the production but they can’t get it out of the area fast enough because of pipeline constraints,” said Jim Rittersbusch, a consultant to oil traders.
Some analysts believe that Permian production could decline, or at least grow more slowly, in 2019 or 2020 as energy companies move from their best acreage to more marginal areas.