The Energy Information Administration said in its latest Short-Term Energy Outlook that crude oil production in the U.S. this year will average 9 million barrels daily, or 110,000 bpd more than last year.
The figure is a substantial upward revision on the 80,000-bpd decline that the EIA forecast in the December edition of the Short-Term Energy Outlook.
What’s more, the prospects for 2018 are also rosy, production-wise, with output seen to rise further to 9.3 million barrels daily, with domestic demand averaging 20.22 million bpd in 2018, up by 370,000 bpd from 2017.
The EIA also noted in its monthly report that this production increase will pressure prices, keeping them closer to US$50 than US$60, which is likely to deepen concerns about the short-term prospects of oil prices, adding to doubts about the effectiveness of OPEC’s production cut deal.
These doubts were there from the very start, with a number of analysts pointing out that OPEC members and non-OPEC producers such as Russia have a history of cheating whenever a concerted effort is made by producers to improve prices by cutting production.
This time is no different, with most observers expecting Iraq to be the first one to fall off the supply-curb wagon because of its almost exclusive dependency on oil export revenues. Yet, besides Iraq, which is a party to the deal, there are also Iran, Libya, and Nigeria, which have all been exempted from it.
All these countries are increasing their production, as are U.S. producers, all of them seeking to make the best of the higher prices while they last. This, according to EIA will not last for long: the agency expects WTI to average US$52 a barrel this year and US$55 in 2018, with Brent US$1 higher than this in both years.