The United States Is Dominating Oil Production, And the Numbers Are Staggering
In a record-setting week for America’s oil and gas markets, some 11.6 million barrels per day are now being produced in the United States. That’s a personal best for us, and it beats out production by Russia (11.4 million barrels per day) and Saudi Arabia (10.7 million barrels per day) just slightly.
The numbers are even more significant when compared to production of one short year ago, when the U.S. was producing 2 million barrels fewer than it is today. That’s an 18% increase in American-made crude in less than 365 days.
Better still, that number, according to the U.S. Government, could go even higher. Production in the realm of 12.1 million+ barrels per day on average is projected for 2019.
“US crude oil production was recorded at a new record high, and the largest in the world by far, moving ahead of Russia and closer to the level Saudi Arabia might be able to reach in another six months,” said Eric Lee, an energy analyst for Citigroup.
Oil production has been so high that America has actually become a crude exporter – an unthinkable scenario a mere 5 years ago – with Mexico, Canada, China and Brazil being the largest buyers of American-made barrels.
America’s Oil Revolution Hasn’t Gone Unnoticed by OPEC and Russia
One of the most fascinating geopolitical battles being played out right now is between Saudi Arabia—de facto leader of OPEC and a key U.S. ally—and OPEC’s smaller states, which want Saudi Arabia to show more backbone and reduce output to raise prices.
The problem, of course, is President Donald Trump, who has urged Saudi Arabia to keep production high as the U.S. imposes renewed sanctions on Iran. Exacerbating the problem is a bilateral deal struck by Russia and Saudi Arabia earlier this year, where the two countries allegedly agreed to increase oil production to limit the damage from Iranian sanctions.
A meeting of dignitaries from OPEC member states is scheduled in Abu Dhabi this weekend, and plenty of drama is expected. Many OPEC members want to know why the Saudis are forming bilateral agreements with Russia in the first place. They also want answers as to why the price of oil has fallen so far, so fast.
“Some in OPEC are blaming Russia and Saudi Arabia for a $15 fall in the oil price and are calling on them to cut production by 1 million barrels a day immediately,” said John Kilduff, partner with Again Capital. “There’s going to be some fireworks at this meeting. The price fall over the last four weeks has been so swift and dramatic that it’s definitely getting their attention.”
If OPEC Agrees to Cut Back Production, It Will Be China—Not America—That Suffers for It
Decades of endless fighting to protect America’s middle east oil interests has taught U.S. citizens that it’s better to leverage our own supply than go to war for someone else’s. And no president in modern history has been as cognizant of this fact as Donald Trump, who has been insatiable in his desire to slash regulations and open new areas for drilling.
Today, America imports half as much oil as it did in 2006. That’s great news for the U.S., which will almost certainly save money on import costs while also increasing its leverage around the globe. At current rates of production, America could impose sanctions on Iran, Russia, and even Saudi Arabia if the need arose.
China, meanwhile, has seen the complete opposite happen, as it is now the world’s largest oil importer. And as everyone in the U.S. knows, that’s not an enviable position to be in. Even worse news for China, the country’s on track to surpass Japan as the world’s largest natural gas importer as well.
This has to be weighing on Xi Jinping, who must now contend with American energy dominance at a time when his country is the world’s leading energy importer. Expect this trend to increase U.S. leverage over trade even more, and bring Xi to the bargaining table sooner than he’d like – lifting markets all over the world when the trade wars finally end.