The United States is positioned to become the second biggest oil producer in the world behind Russia and ahead of Saudi Arabia as its daily output continue to rise with reports putting the daily production at more than 10 million barrels per day,
According to reports by AFP monitored by LEADERSHIP, the shale oil boom is attributed to the new drilling and production techniques. “Boosted by surging output, the United States is becoming a significant exporter of crude oil, a shift that is remaking American infrastructure and altering the global petroleum market,” the report stated.
According to the report, the US has being eyeing this jump since the end of 2015 hence it scrapped the embargo on exports, a policy that dates back to the 1970s oil shocks. Energy companies are said to have seized on the opening, exporting 1.1 million barrels per day to 37 countries in 2017.
The report further explained that Canada is the leading destination of American crude, adding that the US has also been exporting more to Asia, which for long has been a major market for the Organisation of Petroleum Exporting Countries (OPEC), and Russia.
Meanwhile, data shows that China is the second biggest market for US exports. Over the last decade, US crude imports have fallen from 10 million barrels a day to eight million barrels a day.
But the US remains a major importer of crude oil, in large part because American oil refineries are not designed for the lighter-weight crude that comes out of shale fields. Rather, many plants are built to run on heavier oils from Canada, Mexico or Venezuela that are cheaper to procure and result in lofty profit margins after they are processed into gasoline.
Experts are of the view that US oil exports could grow to as much as four to five million barrels a day in the medium term, prompting questions on which markets will buy the additional oil.
Speaking on the issue, a consultancy with Wood Mackenzie, John Coleman, said in the near-term, he expects much of the crude to reach Europe, given the compatibility of the oil with the continent’s refineries.
Meanwhile, oil prices declined yesterday as increased drilling in the United States pointed to more output, raising concerns about a return of oversupply. U.S. West Texas Intermediate (WTI) crude futures were at $62.03 a barrel down 31 cents, or 0.5 percent, from their previous close, while Brent crude futures were at $65.88 per barrel, down 33 cents, or 0.5 percent.
Yesterday’s price falls in part reversed increases last Friday, which came on concerns over tensions in the Middle East. “Despite all the bearish U.S. shale supply headlines, oil prices remain firm as the odds that the U.S. will pull out of the Iran nuclear agreement continue to run very high,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA.
On a simple supply versus demand basis, however, oil markets are facing the possibility of a renewed glut after being in a slight deficit for much of last year. U.S. drillers added four oil rigs in the week to March 16, bringing the total count to 800, the weekly Baker Hughes drilling report said on Friday.
The U.S. rig count, an early indicator of future output, is much higher than a year ago as energy companies have boosted spending. Thanks to the high drilling activity, U.S. crude oil production has risen by more than a fifth since mid-2016, to 10.38 million barrels per day (bpd), pushing it past top exporter Saudi Arabia. Only Russia produces more, at around 11 million bpd, although U.S. output is expected to overtake Russia’s later this year as well.
Soaring U.S. output, as well as rising output in Canada and Brazil, is undermining efforts by the Middle East dominated Organization of the Petroleum Exporting Countries, OPEC, to curb supplies and bolster prices. Many analysts expect global oil markets to flip from slight undersupply in 2017 and early this year into oversupply later in 2018.