It can be viewed week after week. The US is continuing to scale up its oil production. And there is even more on the way. Firstly, Donald Trump is releasing a series of new areas of land in the US for oil exploration. And secondly, fracking, which accounts for a large part of new oil production, is highly profitable at current oil prices (unlike 3 years ago).
According to the US Energy Agency “EIA”, oil production in the US has now risen to 10.038 million barrels per day in November (most recent data). Perhaps it´s already higher in February. This is the highest value since 1970 (Chart). This old record of 10.04 million barrels per day may well be surpassed at this very moment.
This is the same level as the Saudis’ oil production, targeting the Russians as the world’s number one oil producer, with currently around 11 million barrels a day. The chart shows it well: Around the year 2010 the fracking boom in the USA started and the production rate exploded, from then 4 to now more than 10 million barrels per day.
This naturally also reduces the Americans’ dependence on Arab supplies. The US citizens consume 17 million barrels of oil a day. So there is still a difference of almost 7 million barrels, which would have to be covered by increasing domestic production – only then the US would be independent from foreign oil supply.
Why the Oil price is not falling
With oil production in the US steadily rising, one would actually think that the oil price is falling. But it´s increasing! Stockpiles of crude oil had been down for months and OPEC appears to be continuing to maintain its production volume reduction. US producers may laugh their heads off, because they can find themselves in a production gap left open by the OPEC countries.
The main reason for the “non-declining” oil price can be seen in the more than strong global economy. As of today (this may change) almost every analyst expects a further exploding demand for oil in the next years, worldwide! What a scenario. Frackers in the US are pumping more and more, and at the same time the oil price continues to rise. Can there be a more beautiful world?
As much as the Gulf States may be pleased about rising oil prices – private producers in the US are taking away market share from them. Only when OPEC ends its limitation and resumes its own oil production, then there could be too much oil on the market again. The Americans are currently winning, and OPEC is in a defensive position.
By the way, Goldman Sachs expects a Brent price of 82.5 dollars (currently 68.50 dollars) over a period of 12 months. Since in financial circles Goldman is often regarded as a counter-indicator in forecasts thanks to it´s “accuracy”, it might be advisable to be cautious with rising oil prices! In the long term, Goldman sees the Brent price falling back to 60 dollars. WTI is currently trading at 2 dollars below its recent high of 66.60 dollars.
Oh yes, one more thing: The following chart shows how the US has been importing less and less oil since 2010, while China has doubled its import volume in just eight years, and now imports even more than the US.