(John Kemp is a Reuters market analyst. The views expressed are
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* Chart 3: tmsnrt.rs/2oTK6MV
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By John Kemp
LONDON, May 2 U.S. crude production is surging,
complicating OPEC’s efforts to rebalance the oil market.
U.S. production rose by more than 450,000 barrels per day
(bpd) in the five months ending in February, according to the
U.S. Energy Information Administration (EIA) (tmsnrt.rs/2p1SftR).
Total U.S. crude production has increased from a recent low
of 8.567 million bpd in September to 9.031 million bpd in
February (“Petroleum Supply Monthly”, EIA, April 28).
Production continued rising in March and April, and now
stands at over 9.2 million bpd, according to weekly estimates
published by the agency (“Weekly Petroleum Status Report”, EIA,
Weekly estimates are considered less reliable than the
monthly numbers, but the two series have tended to follow one
another closely, so there is no reason to doubt the continued
growth in output (tmsnrt.rs/2p4R11K).
U.S. crude production is increasing at an annual rate of
more than 1 million bpd, comparable to the boom of 2012-2014 (tmsnrt.rs/2oTK6MV).
The rapid recovery in U.S. output is one of the factors
making market rebalancing slower than OPEC anticipated.
Most of the increase so far has come from non-shale
producers in the Gulf of Mexico and Alaska. But the massive
increase in the number of rigs drilling onshore should ensure
shale output rises substantially in the remainder of 2017.
Gulf of Mexico output rose by 228,000 bpd in the five months
to February, while onshore production from the lower 48 states
increased by 175,000 bpd and Alaska’s output rose 61,000 bpd.
U.S. production will continue increasing for at least the
next few months as the lagged impact of earlier increases in the
onshore rig count filter through.
From a cycle low in May 2016, the number of rigs drilling
for oil in the United States has risen by 380 or around 120
Exploration and production firms are still adding drilling
rigs at an average of almost 10 per week, according to oilfield
services company Baker Hughes (tmsnrt.rs/2p4EThd).
Rig counts generally affect production with a lag of about
six months so the full impact of all those extra rigs has yet to
be reflected in the production statistics.
Crude output is already rising much faster than predicted by
any of the major statistical agencies at the start of the year.
EIA has already raised its year-end forecast from 9.22
million bpd in January to 9.64 million bpd in April (“Short-Term
Energy Outlook”, EIA, Jan and Apr 2017).
By the end of the year, production is predicted to have
fully recovered from the slump and to surpass the previous peak
set in April 2015.
Production forecasts are very likely to be revised even
higher given the speed with which output has increased in the
first four months of the year.
Some of the rise in production is the result of offshore
output, but onshore shale production is forecast to exceed its
previous peak well before the end of 2018.
(Editing by Susan Thomas)