Oil prices have faced increased pressure in 2017; if it’s not Nigeria and Libya output, it’s US shale. If it’s not US shale, it’s predictions of weakening demand. If it’s not predictions of weakening demand, it’s Iraq’s pledges to boost capacity despite production cut promises. If it’s not Iraq’s eager production plans, it’s OPEC’s failure to live up to expectations.
And today, the Energy Information Administration is the one dealing the latest blow to oil prices, which had finally started to climb on news that Saudi Arabia was curbing oil exports in August. At 11:40am EST, WTI had climbed a hefty 3%, with Brent reaching $50 per barrel.
The price climb may be short lived, especially in the wake of the EIA’s latest commentary on US crude oil production. U.S. crude oil output, according to the EIA, is now expected to rise to an average of 9.9 million bpd in 2018, a figure that would squarely beat the previous record-high of 9.6 million bpd from 1970, with the Permian and the Gulf of Mexico the main growth drivers, the EIA said in on Tuesday.
US crude oil production in 2016 averaged just 8.9 million bpd.
For 2017, U.S. crude oil output is seen averaging 9.3 million bpd, according to the EIA’s latest estimates in the July Short-Term Energy Outlook.
The Permian Basin is expected to produce 2.9 million bpd of crude oil by the end of 2018, around 500,000 bpd above the EIA estimates for the Permian’s June 2017 production. Permian output will account for almost 30 percent of the total U.S. crude oil production in 2018.
“With the large geographic area of the Permian region and stacked plays, operators can continue to drill through several tight oil layers and increase production even with sustained West Texas Intermediate (WTI) crude oil prices below $50 per barrel,” the EIA said.
The EIA forecast for record high U.S. oil output is more conservative than one projection by Rystad Energy which said at the end of May that “US oil production grows so fast that an all-time high of 10 million barrels per day could be reached before December 31st this year.” Related: Saudis To Take ‘Significant’ Measures To Bolster Oil Prices
The EIA projection for record-high U.S. crude oil production is welcome news for the American energy dominance agenda that President Trump has been promoting. U.S. output would be at an all-time high by the end of his second year in office, if projections turn out right.
Earlier this month, Secretary of the Interior Ryan Zinke said that the U.S. government would offer 75.9 million acres to oil and gas exploration companies in the upcoming lease sale auction in August. The auction will include all unleased areas in the U.S. section of the Gulf of Mexico, with a special focus on shallow water deposits, where the DOI has decided to ask for lower royalties in order to stimulate bidders.
In addition, the Federal Register published today a proposed rule by the Bureau of Land Management (BLM) to rescind a 2015 rule on hydraulic fracturing on Federal and Indian lands with the motivation that it “unnecessarily burdens industry with compliance costs and information requirements that are duplicative of regulatory programs of many states and some tribes.”
By Tsvetana Paraskova for Oilprice.com
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