The International Energy Agency (IEA) expects the United States oil output to be higher than that of Saudi Arabia in 2018, setting the country on a course to become the world’s second-largest producer after Russia, CNBC reports.
American oil companies were expected to ramp up drilling in 2018, encouraged by rising crude prices and a decline in global stocks, the International Energy Agency (IEA) said on Friday.
In its monthly oil market report, the IEA said that 2018 would become a “record-setting” year for American shale oil producers, following strong output growth in 2017 that had put them “neck-and-neck with Saudi Arabia, the world’s second-largest crude producer after Russia.”
“US growth in 2017 beat all expectations … as the shale industry bounced back, profiting from cost cuts, and stepped up drilling activity,” the IEA reported.
With current US crude production of 9.9 million barrels per day (bpd) already at its highest level in nearly 50 years, the IEA estimated that American output would surge above the historic high of 10 million bpd, overtaking Saudi Arabia and rivalling Russia during the course of 2018.
“This represents, after the downturn in 2016 and the steady recovery in 2017, a return to the heady days of 2013-2015 when US-led growth averaged 1.9 million bpd,” the IEA said, adding however that the surge may only become reality if a group of OPEC (Organization of Petroleum Exporting Countries) and non-OPEC oil producers maintained their output cuts.
OPEC member states agreed to lower production in 2017 and have decided to maintain their output cuts for the whole of 2018 to shore up crude prices and reduce a global supply glut.
The move came after prices for the commodity dropped as low as $30 (€24) per barrel in 2016.
The output cuts, combined with geopolitical tensions and a reduction in oil stocks have contributed to a recovery that has seen crude prices rebound to above $70 recently.
The IEA now sees the global oil market moving closer to reaching “a healthy balance between supply and demand,” with “no clear sign yet of OPEC turning up the taps to cool down oil’s rally.”
Moreover, global demand for oil was robust in 2017, but is expected to slow down in 2018, the IEA said. The organization has kept its oil 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.