In the face of a long and drawn-out conflict in the Middle East and Ukraine, US oil production has reached record highs. As of early October, total Stateside petroleum production registered 13.2 million barrels a day. Based on data from the Energy Information Administration this is the highest figure since 1983.
Active US drilling rigs number 501 nationwide and output for 2024 is expected to drop just slightly to 13.12 million barrels a day. Active rigs are down significantly (610 in 2022), however, making output even more impressive considering the erratic US regulatory environment. The current administration is only planning for three oil and gas leases over the coming five years – if this holds it will be the fewest leases offered ever.
Yet, despite record output the world at large is still highly dependent on Saudi Arabia and a handful of other OPEC nation producers. For example, should Iran be drawn into the Israel-Hamas war the country’s 3 million barrels a day would be at risk. A massive explosion at a Gaza City Hospital alone sent prices skyrocketing northward.
Before the Israel-Hamas war, the Saudis were negotiating with Israel to increase their oil production to lower prices globally. Most analysts believe the Saudis would prefer oil in the $80 to $100 per barrel range and will continue pursuing this strategy. One-third of seaborne oil passes through the Strait of Hormuz and greater entanglement with neighboring countries would likely affect vital traffic flows.
The Exxon Mobil purchase of Pioneer Natural Resources in early October was a boost to US domestic energy production. While the merger will naturally result in increased production, the two companies would still only represent 13% of Permian Basin production. The Permian is a shale basin and features high production decline rates. This means that maintaining the status quo production rate takes significant effort and resources.
In late September oil prices reached $93.68 a barrel on the New York Mercantile Exchange. Meanwhile, the Brent crude BRNOO hit $96.55 a barrel, the highest since November. The Exxon move clearly communicates that the demand for fossil fuels is not abating. However, it is still unclear how Russia and Saudi Arabia would react to a potential market share grab by Exxon and Pioneer.
The post The Middle-East Conflict is Driving US Oil Production to Record Highs appeared first on Global Trade Magazine.
