Released July 26, 2019 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Members of the OPEC+ group decided earlier this month to extend their crude-oil production curbs through March 2020, in an effort to rebalance global crude-oil supply and demand. But their efforts are unlikely to be successful for one reason: U.S. production continues to gush upward.
Members of the Organization for the Petroleum Exporting Countries (OPEC), joined by Russia and other nations in a group now called OPEC+, committed to extend their 1.2 million-barrel-per-day production restraint for another nine months. But since that group's first effort to curtail production, in December 2016, U.S. crude oil production has soared by about 3.5 million barrels per day (BBL/d), and another 1 million BBL/d gain is expected over the next year.
In its Short-Term Energy Outlook, the U.S. Energy Information Administration (Washington, D.C.), noted that U.S. crude oil production has risen from an average of about 8.9 million BBL/d in 2016 to 11 million BBL/d in 2018. Production is expected to average 12.4 million BBL/d this year and 13.3 million BBL/d in 2020. For several years, most of the growth has come from the Permian Basin of West Texas and Eastern New Mexico.
Click on the image at right to see a bar chart of U.S. crude oil production.
Production from the Permian Basin has roughly doubled since 2016 to about 4.2 million BBL/d, from about 2 million BBL/d in 2016. For years, skeptics have predicted that Permian production was poised to plateau, but it continued to grow, as producers there became more adept at exploiting its geology and applying different mixtures of water, sand and chemicals to unlock the area's prolific oil and natural gas deposits.
Click on the image at right to see a graphic on crude oil production from the Permian Basin.
The Permian also appears to have overcome its logistical bottlenecks as new outbound pipeline capacity has been brought online. And there is a large and growing backlog of drilled but uncompleted (DUC) wells in the Permian that are ready to flow once additional outbound pipeline takeaway capacity is in service. Nationwide, there are 8,248 DUCs in the nation's unconventional basins, according to the EIA, and nearly half--4,002--are in the Permian Basin.
Click on the image at right to see a line graph showing DUC wells in the Permian Basin.
As the U.S. is not part of OPEC, there are no politically mandated limits to U.S. crude oil production--only economic ones, such as market prices. A growing number of producers can profitably extract oil from unconventional formations when prices are in the $50-per-barrel range, which is a dramatic change from the recent past, when many producers had trouble posting profits when crude oil prices were in the $100 range.
Against the backdrop of continued growth in U.S. oil production is a global market where demand growth continues to weaken, often due to flagging economic growth. Earlier this month, China, one of the world's largest oil consumers, said its second-quarter gross domestic product (GDP) grew by only 6.2%, its slowest rate of growth in three decades. And while a 6.2% quarterly GDP growth rate, roughly double the U.S. rate, would look mighty good to most countries, analysts are questioning whether even that number is being artificially inflated by Chinese authorities.
This month, the International Energy Agency (IEA) (Paris, France) said it expects crude oil supply to exceed demand in 2020 as production continues to grow, especially in the U.S.
The fundamentals point to a near-term future where supply growth exceeds demand gains, which should exert downward pressures on oil prices. That could change if there was a surge in economic growth by China, India and other developing nations, which would absorb surplus production, or if there is an outbreak of hostilities between the U.S. and Iran.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Members of the Organization for the Petroleum Exporting Countries (OPEC), joined by Russia and other nations in a group now called OPEC+, committed to extend their 1.2 million-barrel-per-day production restraint for another nine months. But since that group's first effort to curtail production, in December 2016, U.S. crude oil production has soared by about 3.5 million barrels per day (BBL/d), and another 1 million BBL/d gain is expected over the next year.
In its Short-Term Energy Outlook, the U.S. Energy Information Administration (Washington, D.C.), noted that U.S. crude oil production has risen from an average of about 8.9 million BBL/d in 2016 to 11 million BBL/d in 2018. Production is expected to average 12.4 million BBL/d this year and 13.3 million BBL/d in 2020. For several years, most of the growth has come from the Permian Basin of West Texas and Eastern New Mexico.
Click on the image at right to see a bar chart of U.S. crude oil production.Production from the Permian Basin has roughly doubled since 2016 to about 4.2 million BBL/d, from about 2 million BBL/d in 2016. For years, skeptics have predicted that Permian production was poised to plateau, but it continued to grow, as producers there became more adept at exploiting its geology and applying different mixtures of water, sand and chemicals to unlock the area's prolific oil and natural gas deposits.
Click on the image at right to see a graphic on crude oil production from the Permian Basin.The Permian also appears to have overcome its logistical bottlenecks as new outbound pipeline capacity has been brought online. And there is a large and growing backlog of drilled but uncompleted (DUC) wells in the Permian that are ready to flow once additional outbound pipeline takeaway capacity is in service. Nationwide, there are 8,248 DUCs in the nation's unconventional basins, according to the EIA, and nearly half--4,002--are in the Permian Basin.
Click on the image at right to see a line graph showing DUC wells in the Permian Basin.As the U.S. is not part of OPEC, there are no politically mandated limits to U.S. crude oil production--only economic ones, such as market prices. A growing number of producers can profitably extract oil from unconventional formations when prices are in the $50-per-barrel range, which is a dramatic change from the recent past, when many producers had trouble posting profits when crude oil prices were in the $100 range.
Against the backdrop of continued growth in U.S. oil production is a global market where demand growth continues to weaken, often due to flagging economic growth. Earlier this month, China, one of the world's largest oil consumers, said its second-quarter gross domestic product (GDP) grew by only 6.2%, its slowest rate of growth in three decades. And while a 6.2% quarterly GDP growth rate, roughly double the U.S. rate, would look mighty good to most countries, analysts are questioning whether even that number is being artificially inflated by Chinese authorities.
This month, the International Energy Agency (IEA) (Paris, France) said it expects crude oil supply to exceed demand in 2020 as production continues to grow, especially in the U.S.
The fundamentals point to a near-term future where supply growth exceeds demand gains, which should exert downward pressures on oil prices. That could change if there was a surge in economic growth by China, India and other developing nations, which would absorb surplus production, or if there is an outbreak of hostilities between the U.S. and Iran.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
