US oil output set to hit highest since 1970, says EIA

US energy agency forecasts major increase in country's crude pumping as price rebound enables shale producers to explore more and drilling activity grows.

An oil well near Tioga, North Dakota. The EIA says US output is set to soar. Karen Bleier / AFP
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The United States will pump the most crude next year since 1970 as domestic producers benefit from Opec supply cuts.

Domestic output will average 9.53 million barrels a day in 2018, the Energy Information Administration (EIA) said in its monthly Short-Term Energy Outlook. Shale explorers are benefiting from prices that rose above US$50 a barrel after Opec and 11 other nations agreed to trim production in an effort to ease a global supply glut.

“Shale operators are more bullish with crude trading above $50,” said Michael Lynch, the president of Strategic Energy & Economic Research in Massachusetts. “I’m sure that from Riyadh to Caracas people in oil ministries are watching the US rig count with avid interest and a bit of dismay.”

US oil drillers boosted the rig count by 17 to 583 last week, the most since October 2015, according to Baker Hughes. The country will produce 8.98 million barrels this year, little changed from last month’s EIA forecast. The biggest increase in output will come from the lower 48 states, where cost reductions have allowed explorers to produce profitably in some areas such as the Permian Basin of West Texas at $50 and below.

This year’s supply cuts by Opec and other nations will bring the market into balance. Global oil demand will rise to 98.09 million barrels a day this year, compared with production of 98.03 million.

“Global oil supply and demand is now expected to be largely in balance during 2017 as the gradual increase in world oil inventories that has occurred over the last few years comes to an end,” said the EIA acting administrator Howard Gruenspecht. “Improved economic growth in both developed and emerging market countries is expected to contribute to higher global oil demand over the next two years.”

* Bloomberg

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