While other nations struggle to increase their crude production, and while some throttle back exports to drive the price of oil higher, the United States will be the largest oil producer of 2019. America will not put any brakes on production, and shale will be the key to locking up its first place position among the world’s producers.
According to the carefully followed International Energy Agency (IEA) monthly report, both Russia and Saudi Arabia will hold back “output” for most of the rest of the year, while America “will reinforce its leadership as the world’s number one crude producer.” The report’s authors also wrote, “By the middle of the year, US crude output will probably be more than the capacity of either Saudi Arabia or Russia.”
While the IEA reported that a cut of production announced in December by Saudi Arabia helped put the price of Brent crude above $60 a barrel, its partner Russia appears to have left its oil production at high levels. The authors said that data show Russia increasing crude oil production in December to a new record near 11.5 millions of barrels a day (mb/d) and “it is unclear when it will cut and by how much.”
Among the other large players, Iran increased its production very little at the end of last year. Sanctions against the country by the United States have not been strict enough to block some exports.
Venezuela is another of the world’s largest producers, and it has the world’s largest proven oil reserves. However, significant political turmoil and aging infrastructure will keep much of its potential offline. The political issues likely will not sort themselves out soon.
On the other side of the world oil arithmetic, demand is expected to be muted. The IEA analysts wrote, “the mood music in the global economy is not very cheerful. Confidence is weakening in several major economies.” Some organizations have said that gross domestic product will slacken next year. The International Monetary Fund and the World Bank have issued downbeat forecasts. China, with the world’s second-largest economy, is the largest importer of crude. Recent economic data from the People’s Republic indicate that GDP growth has slowed to the lowest level since the Great Recession. The U.S. economy may be troubled by both the partial shutdown of the federal government and a trade war with China. The demand section of the report shows that global demand will go up a very modest 1.4 mb/d. Some of this will be because crude costs less than a year ago.
The final reason that both crude and gasoline prices may stay near recent lows is that refinery capacity will grow by the largest amount in four decades, up 2.6 mb/d.
The most important claim of the IEA report is that the world’s oil supply will be more than adequate compared to demand, and the position of the United States in the number one spot will almost guarantee that.