The United States is set to continue its oil production surge in 2024, potentially reaching an unprecedented high of 13.3 million barrels per day, according to analysts at Rapidan Energy.
This projection comes as major players in the US oil industry, including Exxon Mobil and Chevron, increase their capital expenditure budgets for the upcoming year, signaling robust investment in the Permian Basin, a central hub for the country’s shale boom.
Global Pressure on Crude Prices
In 2023, the US averaged 13 million barrels per day, slightly below the predicted 2024 figure. This surge in oil output is putting additional pressure on traditional global oil leaders, particularly Saudi Arabia, to manage and control crude prices effectively.
Rapidan Energy’s estimates suggest that the anticipated 13.3 million barrels per day in 2024 would surpass the current all-time record of 13.2 million barrels reached in September.
The ongoing increase in US oil production has coincided with output cuts from OPEC+ nations, such as Saudi Arabia and Russia, who have been grappling with the challenge of elevated oil prices.
The capital expenditure boosts by Exxon Mobil and Chevron underscore the continued significance of the Permian Basin in driving growth within the US oil sector.
Mega-mergers between these energy giants and top shale producers further emphasize the shifting dynamics in the American energy landscape.
While some industry experts warn of a potential strategy shift by Saudi Arabia, reminiscent of the 2014 market flood to undercut US producers, not all analysts share this perspective.
Rapidan Energy’s president, Bob McNally, expressed a different view, stating, “Currently, we do not expect OPEC+ will flood the market to stifle US shale growth.
” McNally added that ministers within OPEC+ remain optimistic about supply-demand fundamentals, anticipating support for prices in the market.
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US Oil Focus Amidst Surging Production
The surge in US oil production signifies a notable shift in priorities for American oil companies.
Unlike previous cycles, where nearly all generated cash was reinvested in capital expenditures, the current trend sees companies allocating only about 40% to 50% of their profits to such investments.
This shift reflects a growing focus on shareholder returns through share buybacks and dividends.While US shale production, targeted by Saudi Arabia in 2014, remains a factor, McNally suggests that OPEC’s primary concern lies in the inadequate investment in supply rather than an excess of shale production.
“OPEC does not share the IEA’s peak demand view and therefore thinks shale oil growth is less of a threat,” McNally explained.
As the US oil industry continues its remarkable growth, the global energy landscape faces further complexities, with implications for traditional oil-producing nations and a potential reshaping of the balance in the industry.
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