Increased crude oil production throughout Texas this year has resulted in a huge jump in U.S. oil production. Now, apparently the U.S. has surpassed Saudi Arabia and Russia to become the world’s largest oil producer a feat that would have been thought impossible just 10 years ago.
The Energy Information Administration (EIA) at the Department of Energy issued a report recently estimating that U.S. oil production volumes passed Saudi Arabia in February and Russia in June and August.
“U.S. crude oil production, particularly from light sweet crude oil grades, has rapidly increased since 2011,” EIA noted in its Short-Term Energy Outlook. “Much of the recent growth has occurred in areas such as the Permian region in western Texas and eastern New Mexico, the Federal Offshore Gulf of Mexico, and the Bakken region in North Dakota and Montana.”
Karr Ingham, author of the Texas Petro Index, noted that oil production in Texas increased 25 percent in July over July 2017 surpassing a 15 percent increase nationwide.
“Texas has everything to do with these extraordinary U.S. crude oil production milestones,” Ingham said. “Texas has shattered its prior production records and crude oil production surpassed 4 million barrels per day for the first time in 2018. A whopping 40 percent of total U.S. crude oil production comes from the great state of Texas.”
EIA pointed out that the accuracy of production volumes from Russia and Saudi Arabia can be questioned because Russian production data mainly comes from the Russian Ministry of Oil and Saudi Arabian production comes from the International Energy Agency (IEA).
EIA estimates that U.S. crude oil production averaged 10.9 million barrels per day (b/d) in August, up by 120,000 b/d from June. EIA forecasts that U.S. crude oil production will average 10.7 million b/d in 2018, up from 9.4 million b/d in 2017, and will average 11.5 million b/d in 2019.
Brent crude oil spot prices averaged $73 per barrel (b) in August, down almost $2 from July. EIA expects Brent spot prices will average $73/b in 2018 and $74/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.
EIA estimates dry natural gas production in the United States was 82.2 billion cubic feet per day (Bcf/d) in August, up 0.7 Bcf/d from July. Dry natural gas production is forecast to average 81.0 Bcf/d in 2018, up by 7.4 Bcf/d from 2017 and establishing a new record high. EIA expects natural gas production will continue to rise in 2019 to an average of 84.7 Bcf/d.
EIA expects Henry Hub natural gas spot prices to average $2.99/million British thermal units (MMBtu) in 2018 and $3.12/MMBtu in 2019. NYMEX futures and options contract values for December 2018 delivery that traded during the five-day period ending September 6, 2018, suggest a range of $2.31/MMBtu to $3.77/MMBtu encompasses the market expectation for December Henry Hub natural gas prices at the 95% confidence level.
Alex Mills is the former President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.