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US Oil Production Soon to Lead World

Oil production in the United States exceeded 10.3 million barrels per day in February. As recently as 2007 the US only produced about 7 million barrels per day and pundits talked about “Peak Oil”. What’s happened? Shale oil and fracking.

American oilmen opened up vast new oil deposits by finding the technological means (fracking) to extract oil from super abundant shale rock formations in places like North Dakota, Pennsylvania, and wide stretches of Texas, Oklahoma, and Louisiana. The new techniques also enabled more oil to be recovered from existing traditional wells.

At its current pace, US oil production will overtake Saudi Arabia’s 10.4 million barrels per day by later this year and Russia’s 10.9 million barrels per day by the end of 2019. With oil demand growth fairly tepid, this US supply growth puts tremendous pressure on OPEC and Russia to maintain their production quotas.

The direction of oil prices will hinge on how strong global economic growth is in 2018 and 2019. Right now a trading range between $50 per barrel and $70 per barrel seems likely.

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