13 Million Barrels
In September, American oil production reached an all-time high. What comes next?
The United States produced 13 million barrels of crude oil per day in September, according to an energy markets consultancy. That amount also represents the highest level of current crude production of any country in the world and more than double the level production just a decade ago. If other petroleum liquids and biofuels are added then total daily US production reaches over 20 million barrels per day. Saudi Arabia, by example, produces about 12.5 million barrels per day.
Pre-pandemic US production also reached a historic high of 12.3 million barrels/day in late 2019. These numbers represent an impressive production mark for a nation frequently seeking to balance energy independence with an embrace of renewable sources in a geopolitically turbulent world.
But OPEC (Organization of the Petroleum Exporting Countries) still has significant influence in determing oil prices, particularly as the commodity finds welcoming markets across Asia. Saudi Arabia’s voluntary cuts of one million barrels per day — extended through the end of the year — have also helped send crude prices soaring 10% in the past month to over $90 a barrel. There is little enthusiasm, though, for rolling back OPEC production cuts — yet.
Does 13 million barrels mean anything when oil is at $90/barrel? Yes, America’s durable oil production, as well as ongoing releases from the nation’s Strategic Petroleum Reserve (SPR) over the past 18 months, have served as a modest damper on rising global oil prices. Without American production, today’s price would be closer to $100/barrel — with increased price spike volatility.
Indeed, the behavior of American shale oil producers is now a critical factor in oil prices and energy market strategies. Much has changed since the pandemic destroyed oil demand in early 2020. In 2023, shale producers are modestly more conservative than five years ago in terms of expansion of production. Rig counts (the number of active drilling rigs that are producing oil or close to producing oil) have remained flat throughout 2023. OPEC+ producers are taking note of this, too. With US shale producers maintaing discipline and modest growth, OPEC members and allies (Russia) can cut their output, pushing up prices without risking a US shale production countermeasure, a regular tit for tat scenario just five years ago.
Iran oil exports — long the focus of international sanctions — are another factor in 2023 oil prices. Iran is now exporting close to two million barrels per day. This creates additional downward pressure on oil prices even with 2023 OPEC+ production cuts. How much oil Iran can regularly produce and export is a still a question mark in late 2023.
Though the move toward renewable energy sources will continue, the power of American shale oil will remain. Many energy market analysts expect that the current impressive oil production in the US may actually represent a peak with nowhere to go but down in the coming years. Time will tell. Oil — a complex commodity market that will remain so.
