US could surpass Saudi Arabia in oil production

Marco Green
January 23, 2018

"We shouldn't limit our efforts to 2018 - we need to be talking about a longer framework of cooperation", Falih said.

It comes after US President Donald Trump a year ago vowed to withdraw his country from the Paris Climate Change Agreement, claiming signing the accords had harmed the US' economic prospects.

Mr. Falih pointed to weaknesses in the deal, saying the first OPEC-led output cuts in nearly a decade had yet to instill enough confidence in the oil industry for investment in expensive projects. At the same time, so is the upward potential, because of the OPEC cuts.

The supply cuts by OPEC and its allies, which are scheduled to last throughout 2018, were aimed at tightening the market to prop up prices.

"It's definitely a constructive report", said Nick Holmes, an analyst at Tortoise Capital Advisors LLC in Leawood, Kansas, which manages $16 billion in energy-related assets. The current agreement on supply cuts is due to expire in December 2018.

Profit margins of companies which have crude and crude derivatives as their significant raw material components, the prices of which are linked to the market price, could see some contraction. In November, it was reported that OPEC production fell for a fourth straight month.

Al Mazrouei said, "all of those give the right signals to market and we have seen the market giving us back right signals in terms of reducing inventories, in terms of approaching market recovery and we are in good shape, I'm optimistic the rest of the year will be good as well". However, the rising USA output continues to be a crucial factor in the determination of oil prices.

But, some observers of events on the oil market note, why would OPEC, or rather Saudi Arabia, want to talk prices down ahead of Aramco's IPO?

For those who retain such memories, news of OPEC reeling beneath the unstoppable onslaught of high-tech American oil production and Saudis shopping for gas in Texas is both astonishing and delightful. Shale's rise in production will simply provide supply to meet growing demand, without affecting OPEC's plans, he said.

US oil production is booming and is forecast to top that of heavyweight Saudi Arabia and rival Russian Federation this year, a global energy agency said Friday. According to the Weekly Petroleum Status Report by the EIA, US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, of the week ending January 12 decreased by 6.9 million barrels from the previous week.

He said a January 21, 2018 committee meeting of some OPEC and non-OPEC ministers in Oman would focus on reviewing adherence to the cuts, adding that compliance in December was at 125% (from 106% in 2017), reflecting non-OPEC countries' staying true to their commitments on production cuts.

"If prices remain high, it is U.S. shale producers who are benefiting more than the Opec producers but if Opec doesn't do anything, they will also lose out, so they are basically treading a thin line between helping themselves and helping everybody else including shale producers", Mr Manibhandu noted.

"There is an unintended outcome from this higher price", said Ed Morse, head of commodities research at Citigroup Inc., according to Bloomberg.

Other reports by Click Lancashire

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