US oil output is booming and seen outpacing Saudis, Russia

PARIS — A global energy agency says that US oil production is booming and is forecast to top that of heavyweights Saudi Arabia and Russia this year.

The International Energy Agency said in its monthly market report released Friday that US oil production, which has already risen to its highest level in nearly 50 years, will push past 10 million barrels a day as higher prices entice more producers to start pumping.

It says that “this year promises to be a record-setting one for the US.”

Meanwhile, global growth in demand for oil is forecast to remain unchanged at 1.3 million barrels a day. That’s mainly due to the impact of higher oil prices and as consumers switch to other types of energy, like natural gas.

US crude production levels put “it neck-and-neck with Saudi Arabia, the world’s second largest crude producer after Russia,” the IEA said.

“Relentless growth should see the US hit historic highs above 10 million bpd, overtaking Saudi Arabia and rivaling Russia during the course of 2018 -– provided OPEC/non-OPEC restraints remain in place,” it said.

A global supply glut pushed oil prices as low as $30 per barrel at the start of 2016.

But producing nations — both inside and outside the OPEC oil cartel — struck a deal at the end of 2016 to cut back production and drive prices higher.

Geopolitical tensions and a reduction in oil stocks have also contributed to the recovery.

Crude recently rose above $70 per barrel 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 United States is not a party to the deal, its shale production can continue uninhibited.

“US growth in 2017 beat all expectations … as the shale industry bounced back, profiting from cost cuts, (and) stepped up drilling activity,” the IEA said.

“Explosive growth in the US and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico,” it said.

“The big 2018 supply story is unfolding fast in the Americas,” the IEA said.

Shale production is controversial, because in order to extract oil and gas, a high-pressure mixture of water, sand and chemicals is blasted deep underground to release hydrocarbons trapped between layers of rock.

And environmentalists argue that the process — known as fracking, or hydraulic fracturing technology — may contaminate ground water and even cause small earthquakes.

Turning to OPEC output, the IEA said that there was “no clear sign yet of OPEC turning up the taps to cool down oil’s rally.”

In its own monthly market report published on Thursday, the Organization of Petroleum Exporting Countries had said that the global oil market was moving closer to reaching a healthy balance between supply and demand.