U.S. shale, once the sworn enemy of the Organization of the Petroleum Exporting Countries (OPEC), has once again strengthened its presence in the global oil market. The situation has changed dramatically from a few months ago, when it was seen as not even close to OPEC in terms of market influence.
From the Permian Basin in West Texas to the Bakken in North Dakota, production has increased to record levels, far exceeding analysts’ expectations. On the other hand, OPEC+, which is made up of OPEC and non-member oil producing countries, has put the brakes on production in an attempt to stem the decline in prices.
Around this time last year, the U.S. government predicted that domestic production would average 12.5 million barrels per day in the fourth quarter of this year. The forecast was recently revised upward to 13.3 million barrels. The difference is equivalent to adding Venezuela to the world’s supply.
The phenomenon has rattled the world and called into question OPEC+’s strategy of curbing supply to prevent a glut from devastating prices. It also became clear that U.S. shale companies still have enough influence to undermine OPEC+ efforts.
“It’s clear that the U.S. played an outsized role in global markets in 2023, including by putting pressure on OPEC+ to curb production,” Wood Mackenzie analyst Ryan Duman said. stated in an interview.
America’s Surprise Oil Production Boost
US crude production was above EIA forecasts in 2023
Source: Energy Information Administration
However, there are indications that shale companies, which have been increasing their budgets, may start tightening them again. Capital spending is expected to increase by just 2% across the industry next year, according to Evercore. This is a slowdown from this year’s 19% increase and far behind the record 44% increase set two years ago.
“This is not the same as the drilling frenzy of the shale boom,” said Angie Gilday, head of U.S. energy at KPMG. “It’s a significant but carefully calculated increase,” he said in an interview.
Original title:US Shale’s Surprise Oil-Production Surge Poses Threat to OPEC(excerpt)
2023-12-17 16:53:00
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