The United States’ surging crude production is now making it a major global oil exporter with shipments traveling to far flung places as the United Arab Emirates (U.A.E), China and the U.K.
The end of a ban on U.S. exports in 2015 coupled with the rapid growth of shale production, has changed the flow of petroleum around the world. Shipments from U.S. ports have increased from a little more than 100,000 barrels a day in 2013 to 1.53 million in November, according to Bloomberg data.
Brent crude stood at $64.65 per barrel (pb), Thursday, according to Bloomberg data.
“As long as the price is high, shale will continue to produce which has a moderating effect, however when the price goes below $30 pb, it going to be expensive to produce shale oil, compared to countries like Saudi Arabia who produce for less than $10,” said Abayomi Fawehinmi, an energy analyst at a Lagos-based consulting firm.
Fawehinmi added, “The international oil price has in the past touched $140 per barrel, so the current price is not bearish, however in 2018 the price of oil will likely be in the range of $60. Shale production responds to the price of oil, it can’t initiate it, but when the price is high it will serve as a modulator which we are currently seeing.”
The U.S. exported about 700,000 barrels of light domestic crude in December to the U.A.E., the Census Bureau reported this week.
“Despite UAE membership of OPEC, UAE buying crude from U.S might have been on a basis of a good relationship they have with the US government,” said Dolapo Oni, head of energy and research, Ecobank.
U.S. net oil imports have plunged to below 3 million barrels a day, the lowest since data available starting 45 years ago, compared with more than 12 million barrels a day in 2006. The U.S. could become a net petroleum exporter by 2029, the Energy Information Administration (EIA) said this week.
There is mounting concern that rising US output, which is expected to surpass Saudi Arabia and rival Russia, could offset production curbs led by OPEC and Russia, putting more downward pressure on prices.
The question of whether the shale sector can continue at this pace remains an open debate as OPEC 14 member countries produce some 40 percent of global oil output, thereby giving them some influence on the oil price and the global economy.
Surging U.S. production threatens to offset the impact of OPEC’s deal with Russia to keep 1.8 million barrels a day off the market through 2018.
Oil prices fell for a fourth straight session on Wednesday after government data showed U.S. crude and fuel stockpiles rose last week, while American drillers continue to increase production.
The EIA’s preliminary figures showing U.S production at 10.25 million barrels a day was telegraphed by last week’s report that November output rose above 10 million barrels a day for the first time since 1970.
On Tuesday, EIA forecast U.S. production will average 10.6 million barrels a day this year, enough to continue surpassing output from Saudi Arabia, until recently the world’s second-biggest producer. In 2019, EIA sees American output at 11.2 million barrels, enough to rival top producer Russia.
The EIA also said on Wednesday that American crude in storage tanks and terminals increased by 1.9 million barrels last week as refiners shut or limited operations to conduct seasonal maintenance. Gasoline and diesel stockpiles expanded as well.
Nigeria’s exemption from any cuts to its crude oil output has combined with higher prices and stability in the Niger-Delta to boost the inflow of petrodollars, boosting external reserves and calming the nerves of foreign investors.
“OPEC will not continue to give us production cuts. We are lucky we can push out more volume because Bonga is back which an advantage is for us,” Fawehinmi concluded.
DIPO OLADEHINDE & ENDURANCE OKAFOR