The United States has increased oil production far beyond what analysts predicted, raising production to a record level, as OPEC+ tries to reduce supply in an attempt to halt falling prices.
This time last year, U.S. government analysts predicted that domestic production would average 12.5 million barrels per day during the current quarter. In recent days, this estimate has increased to 13.3 million, the difference is almost equivalent to the voluntary cut of 1 million barrels per day in OPEC+ production (not counting Saudi Arabia’s reduction in the same amount) decided on November 30 .
The increase in oil production in the United States is having strong repercussions on international markets, calling into question OPEC+’s strategy of restricting supply to avoid the potentially catastrophic impacts of excess production on prices.
The US has clearly played an important role in the global market in 2023, including pressuring OPEC+ to reduce its production.
The Organization of Petroleum Exporting Countries openly sought to control the influence of US shale oil as early as 2014, when the group flooded world markets with oil in an attempt to regain market share from the rising US oil sector. The measure worsened the existing excess supply and triggered a 65% drop in oil prices, which took 14 months to reach their lowest level.
That collapse sent a jolt through the US shale economy, putting an end to years of dizzying production growth. And although the expansion eventually resumed, it was reversed by the global pandemic in early 2020. The shale industry emerged from this setback with a determination to prioritize returning money to investors over chasing production gains.
Meanwhile, in the years following the 2014-2016 settlement, the OPEC+ alliance, as it became known, worked to impose supply quotas among member countries as part of a broader strategy of balancing global supply and demand to maintain robust prices.
That self-discipline helped stabilize the market in 2020, and again this year, in the face of slowing demand and a glut of oil. But the latest OPEC+ cuts announced at the end of November did not stop oil from falling further.
Today, OPEC+ has less power to influence markets through production cuts, due to the increase in production in the United States, and the entry of new players into the market, such as Brazil, Guyana and other producers.
Part of what makes the rise in U.S. oil surprising is that companies have managed to increase production even as the number of drilling rigs in operation has fallen by about 20% this year. This productivity gain has confused many analysts and researchers who have long relied on the so-called rig count as an indicator of future oil production. This is partly because after years of heavy investment in production and being hit by recessions, companies are committed to keeping spending under control, introducing new technologies and focusing on returning money to shareholders. .
Explorers are extracting crude oil from new wells more efficiently due to innovations in everything from electric pump technology to new strategies for mobilizing workers while fracking wells to minimize downtime. One prominent example was the replacement of the iconic decades-old pumpjack with high-tech underground equipment as tall as a three-story building that sits inside a well to push more oil to the surface.
By Economic Editor
Angola Portal