While OPEC nations (and some non-OPEC) chose to go the route of the production cut deal to stabilize the market, U.S. oil and gas took the $50 per barrel price opportunity to ramp up production. The result? Production levels just barrels away from record highs. Our focus on advances in technology and increased operational efficiency over the global glut season has paid off. We are now producing more with less - lots more. The next big American oil industry boom is fast approaching.
$50+ Pre Barrel Prices Light Fuse For U.S. Oil Production Surge
Effective January 1, OPEC nations entered into an agreement to cut production in an attempt to stabilize the oil market. Several non-OPEC nations, including Russia, were in on the deal. And the deal stuck. Recent OPEC data reports a 90% compliance level by OPEC producers, with non-OPEC producers meeting around 50% of the proposed cuts. Compliance to the deal was well above anticipated.
OPEC’s decision to cut excess supply brought prices to just above $50 per barrel, giving U.S. shale oil producers the go-ahead to get pumping and bringing production levels to near record highs.
As a result, the U.S. Energy Information Administration (EIA) increased its U.S. oil production estimate by 230,000 to 9.5 million bpd in 2018, the highest production level in 48 years.
Ever-growing U.S. oil supply continues to quash OPEC’s attempt to sink U.S. oil companies with low prices. OPEC’s production cut agreement is scheduled to expire this year, (though a recent Reuters report suggests OPEC may extend its agreement with non-OPEC members and may request larger cuts if global supply doesn’t meet its target low).
With the U.S. production extravaganza showing no signs of slowing, future prices will depend on production by other nations – potentially unravelling the OPEC production cut deal.
America Oil Industry Rides Out Low Prices With Tech Advancement, Operational Efficiency
Contrary to OPEC nations, the U.S. oil and gas industry (true to form) opted to battle the global oil glut by sharpening production efficiency and preparing for a serious comeback. U.S. oil and gas has chosen to make lemonade with the lemon of low prices, and its paying off. Advancements in technology have made drilling rigs more efficient than ever.
The Permian Basin has blown up, adding 170 rigs in the last 11 months. According to CNN Money, Capital Economics estimates that the U.S. can match 2015’s output using only half the number of rigs.
EIA Bumps 2018 Domestic Oil Output Forecast Up To 9.5M BPD
For several weeks now, the EIA has reported commercial crude oil inventory increases of 9.5 million barrels, bringing inventories to 518.1 million barrels this week, the highest weekly data level since 1982. Increased U.S. oil production has led the U.S. EIA to increase its 2018 domestic oil output forecast from 8.9 million bpd in November to 9.5 million bpd, approaching the record high of 9.6 million bpd set in November 1970.
Goldman Sachs estimates the U.S. experienced at least 169,000 petroleum industry job cuts between late 2014 and mid 2016. Thankfully, we can see light at the end of the tunnel for this unfortunate trend. This new age in the U.S. oil industry means fewer layoffs, more jobs and jobs entirely new to the industry.
Oil and gas companies are scrambling for new talent and skilled workers to cover the shortage that resulted from cutbacks over the last few years. With policymakers supporting increased production, the U.S. oil and gas industry will need even more workers to build new infrastructure and fill new roles. Goldman Sachs estimates U.S. oil and gas may open up as many as 100,000 jobs over the next 21 months.
U.S. oil and gas also needs workers skilled in data analytics, petroleum data science and software development to cover the advancements in technology that are already in place and to create new ones to continue our path toward production efficiency. Opportunity in U.S. oil and gas today is limitless – time to jump on board if you haven’t already.