The ever-growing production of crude oil in the United States may soon overtake Saudi Arabia and challenge the Russia’s first position. This is clear from the International Energy Agency’s (IEA) monthly oil market report. The expectations are that in 2018 the US production will reach more than 10 million barrels per day – a peak not seen since the 1970s. The IEA forecasts growth to 10.4 million barrels per day, representing an increase of 260,000 barrels, largely due to the recent rise in the oil prices.
The agency says that production in the non-OPEC countries headed by the United States is rapidly growing over the past year, compensating for cuts in production of cartels and some other countries.
Last year, OPEC and ten other oil producers, including Russia, agreed to cut output by nearly 2% by the end of 2018. Initially, the agreement for the first time in 2016, aimed to bring balance to the crowded market and stimulate price rises.
According to the IEA, the average of 14 cartel members produced 39.2 million barrels per day, taking into account the decline in production. By contrast, the US production has compensated about 60% of these cuts. With an increase of about 600,000 barrels per day, the US oil industry has exceeded “all expectations”.
The price of the European Brent oil increased by approximately 50% since June 2017, reaching more than 70 USD per barrel this month, for the first time in three years. The main reasons for this growth were OPEC cuts, geopolitical supply risks, reduced production in Venezuela and temporary shutdown of pipelines.
“The oil market is clearly tightening”, says the IEA, noting the continuing decline in global oil reserves. The agency left its forecasts for an increase in oil demand for 2018 at 1.3 million barrels per day.