U.S. crude output is accelerating, highlighting OPEC’s dilemma as the cartel reins in its own production to revive prices.
Crude supply will average 12.41 million barrels a day this year and 13.2 million in 2020, the U.S. Energy Information Administration said on Tuesday, up more than 300,000 barrels a day from the previous month’s estimates. The latest short-term energy outlook “puts the nation on track to set a new production record for a third consecutive year,” EIA Administrator Linda Capuano said in a statement.
Soaring output is putting the U.S. on course to become a net exporter of crude oil and petroleum products next year. It’s also forcing OPEC to scale back estimates of how much crude the group needs to pump this year as the demand outlook softens.
“Every report of any kind for the U.S. is basically adding barrels to the flow,” said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York. “If you accommodate them by leaving the door open, they’re going to stick a foot in the door and steal your customer.”
OPEC’s Vienna-based research department reduced its estimates for the average amount of crude the world requires from the group this year by 240,000 barrels a day to 30.59 million. Forecasts for non-OPEC supply were lifted by an improved outlook for the Gulf of Mexico, while projections for global demand were lowered as a result of weakness in Europe and the Americas.
The EIA reduced its forecasts for both Brent and West Texas Intermediate oil benchmarks by $3 a barrel for 2020. “Despite many uncertainties, EIA believes strong growth in global oil production will put downward pressure on prices,” Capuano said.