U.S. oil output accelerating as OPEC meets with shale

The Energy Information Administration boosted its output forecasts for 2018 and 2019, and said that production would top 11 MMbopd in October -- a month ahead of prior estimates.

The forecast comes as U.S. shale producers met with OPEC officials for a dinner on the sidelines of the CERAWeek by IHS Markit conference in Houston Monday night. OPEC Secretary General Mohammad Barkindo told Bloomberg after the dinner that he wasn’t worried about U.S. production growth because "demand is very robust, very strong."

Yet overall U.S. output this year will average 10.7 MMbopd, breaking the 1970 record of 9.6 MMbopd, according to EIA’s monthly Short-Term Energy Outlook. That’s after production jumped to a record high of 10.057 MMbopd in November, according to previous data from the EIA.

Next year, average output will climb to 11.27 million, up from a prior forecast of 11.18 million, the report showed. That puts the U.S. on track to eclipse the likes of Saudi Arabia and Russia as the world’s largest producer.

Saudi Aramco Chief Executive Officer Amin Nasser downplayed the impact of U.S. output during a speech in Houston. The future role of oil is "widely misunderstood," Nasser said Tuesday, emphasizing that oil demand globally remains healthy.

Nevertheless, the U.S. stands to dominate global oil markets for years to come, satisfying 80 percent of global demand growth to 2020, the International Energy Agency said Monday. And the U.S. is set to become part of the top five global crude exporters, according to consultant Wood Mackenzie Ltd. West Texas Intermediate crude has averaged above $62 a barrel so far this year, encouraging a ramp-up in drilling, while the oil rig count has climbed for six straight weeks to the highest level since 2015.

The EIA increased its estimates for global production this year, while lowering demand. Output is seen at 100.62 MMbopd, up from 100.43 million previously, with demand at 100.2 million, compared with 100.23 million.