The U.S. is poised to take the title of world’s largest oil producer this year.
According to the latest report from the International Energy Agency (IEA), “this year promises to be a record-setting one for the US,” with the potential of surpassing the output of Saudi Arabia and Russia.
The rapid increase in U.S. production is due in large part to the booming shale industry. The IEA’s report suggests that U.S. crude production could exceed 10 million barrels a day this year, raising its outlook by 260,000 barrels a day.
Yet this boom in production is also a direct beneficiary of cuts to OPEC and Russian production. Starting in January of last year and due to continue throughout 2018, OPEC and 10 other producers agreed to production cuts to overcome a glut and push up prices.
The Wall Street Journal reports that OPEC members averaged a 95% compliance rate last year, with production from the group dropping 39.6 to 39.2 million barrels a day. And these efforts appear to be paying off. Brent crude futures peaked at $70.37 a barrel on Monday, climbing to a three-year high.
But growing oil prices has had the unintended side effect of allowing U.S. shale producers to restart operations. U.S. production, in turn, has offset OPEC’s cut, growing by 600,000 barrels a day last year. Despite this, the IEA expects the oil market to remain in balance this year. As long as OPEC and Russia continue to curb production, “the market is likely to balance for the year as a whole with the first half in a modest surplus and the second half in a modest deficit.”