The U.S. will pump the most crude next year since 1970 as domestic producers benefit from OPEC supply cuts.
Domestic output will average 9.53 million barrels a day in 2018, the Energy Information Administration said in its monthly Short-Term Energy Outlook released Tuesday. Shale explorers are benefiting from prices that rose above $50 a barrel after the Organization of Petroleum Exporting Countries and 11 other nations agreed to trim production in an effort to ease a global supply glut.
“Shale operators are more bullish with crude trading above $50,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. “I’m sure that from Riyadh to Caracas people in oil ministries are watching the U.S. rig count with avid interest and a bit of dismay.”
U.S. oil drillers boosted the rig count by 17 to 583 last week, the most since October 2015, according to Baker Hughes Inc. The country will produce 8.98 million barrels this year, little changed from last month’s EIA forecast. The biggest increase in output will come from the lower 48 states, where cost reductions have allowed explorers to produce profitably in some areas like the Permian Basin of West Texas at $50 and below.
This year’s supply cuts by OPEC and other nations will bring the market into balance. Global oil demand will rise to 98.09 million barrels a day this year, compared with production of 98.03 million.