PARIS • The United States is set to overtake Saudi Arabia as the world's number two oil producer after Russia this year, as shale companies, attracted by rising prices, ramp up drilling, the International Energy Agency (IEA) said yesterday.
Crude production of 9.9 million barrels per day (bpd) in the US was now at the highest level in nearly 50 years, "putting it neck-and-neck with Saudi Arabia, the world's second-largest crude producer after Russia", the IEA said in its monthly market report.
"Relentless growth should see the US hit historic highs above 10 million bpd, overtaking Saudi Arabia and rivalling Russia during the course of 2018 - provided Opec/non-Opec restraints remain in place," it said.
Crude rose above US$70 per barrel this week for the first time since 2014 after Opec and non-Opec countries agreed to extend their combined cutbacks until the end of this year. Rising prices have, in turn, made it more attractive for shale companies to increase drilling. And since the US is not a party to the deal, its shale production can continue uninhibited.
"Explosive growth in the US and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico," the IEA said.
In its own monthly market report published on Thursday, the Organisation of Petroleum Exporting Countries had said that the global oil market was moving closer to reaching a healthy balance between supply and demand.
The IEA, which advises advanced market economies on energy policy, said that there was 95 per cent compliance by Opec countries with the agreed cuts.
In the first annual decline since 2013, total oil production from the group's 14 members fell from 39.6 million bpd to 39.2 million bpd, it said. And while "supply discipline from the non-Opec camp has been less rigorous, 82 per cent for 2017", it was "nonetheless strong", the agency said.
At the same time, the increase in US production offset roughly 60 per cent of the realised cuts, the IEA said. The impact of the reduction was further blunted by a rebound in output from Libya and Nigeria, excluded from the cuts.
For producers, there was a silver lining to taking part in the supply cuts, since "they earned more in 2017 while pumping less", it said. Among Opec producers, Saudi Arabia saw the biggest reward, making nearly US$100 million a day in additional revenue.
As a whole, Opec producers netted an extra US$362 million a day.
Russia, not a member of the cartel, earned the most, pocketing an additional US$117 million a day.