If oil prices hold above $50 a barrel, the fledging comeback in U.S. drilling could crescendo into another oil boom over the next two years.
In a report Tuesday, the Energy Information Administration said it believes a second burst of shale drilling could bring U.S. oil production close to an all-time record by the end of 2018. That analysis, if correct, would mark a swift turnaround for an industry devastated by low oil prices in recent years, and challenge OPEC’s efforts to rein in the global oil glut.
“OPEC knew the likelihood of U.S. shale picking up, but what they didn’t know – and what none of us know – is how strong it will come back,” said Neil Atkinson, head of the oil markets division of the International Energy Agency.
The EIA projected the nation’s output could vault above 10 million barrels a day by the fourth quarter next year, an increase of 1.2 million from current levels. A surge of that size would put U.S. oil production within 30,000 barrels a day of the nation’s record, set in November 1970.
One big reason the EIA expects output to climb is that companies are shelling out more money to pump oil. Forty-four U.S. oil producers hiked spending in the fourth quarter by a combined 72 percent, or nearly $5 billion, compared with the same period the year before.
Another reason is that shale drillers have likely already seen the worst of the sharp oil production declines that come with drilling wells into dense, stubborn shale rock.