Instability in the Middle East is posing problems for OPEC, the world’s largest oil cartel. The cartel may have trouble producing enough oil to meet demand later this year, according to energy .
But in the U.S., oil production continues to boom, reaching a 28-year high last week, rising 78,000 barrels per day to reach 8.428 million — close to the 1970 all-time production high of 9.6 million barrels per day.
Last week, the International Energy Agency (IEA) said that while OPEC production rebounded slightly from earlier this year the cartel would need to “hike third-quarter production by another 900,000 b/d from April levels” in order to meet forecast demand.
OPEC production recently took a hit from unrest in Libya and northern Iraq. IEA says it’s unclear if either of those regions will be able to recover from the violence and unrest enough to increase production.
IEA warned that “while OPEC has more than enough capacity to deliver, it remains to be seen whether it will manage to overcome the above‐ground hurdles that have plagued some of its member countries lately.”
OPEC production hit five-month lows in March, reports the Wall Street Journal, which rebounded slightly in April to reach 29.9 million barrels per day. But this is short of the 30.7 million barrels per day the cartel needs to meet demand for its crude in the coming months, according to IEA projections.
But it’s not just OPEC production that’s falling short, as other non-OPEC countries have seen production fall this year.
“The downward revision is due to lower forecasts for Azerbaijan, China, Colombia, Kazakhstan, Mexico and South Sudan, which more than offset upward revisions among a number of producers, including Brazil and Russia,” IEA said.
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“Even OECD Americas production edged marginally lower as an increase in the US of roughly 120,000 b/d month-on-month only partially offset declines in Canada (-185,000 b/d) and Mexico (-20,000 b/d),” the group added.
Non-OPEC oil production fell by 550,000 barrels per day in March because output fell in virtually every region outside Latin America and the U.S., said IEA.
“Growing domestic production of natural gas and oil continues to reshape the U.S. energy economy, with crude oil approaching the 1970 all-time high of 9.6 million barrels per day,” according to the U.S. Energy Information Administration (EIA), the statistics and arm of the Energy Department.
The advent of hydraulic fracturing, or fracking, coupled with horizontal drilling has enabled drilling companies to unlock vast reserves of oil and natural gas locked in tight underground shale formations.
Fracking involves injecting water, sand and chemicals to crack shale formations and release oil and natural gas. Environmentalists have condemned the drilling practice as dangerous to water and air quality, but so far such criticisms have been unsubstantiated.
“This is an incredible phenomena that looks set to continue,” John Kilduff, an energy market at the New York-based Again Capital LLC, told Bloomberg last week. “There’s a long way to go before we explore and exploit all of the shale deposits out there.”
Last year, the U.S. was able to meet 87 percent of its own energy needs, including being able to meet 90 percent of its own energy needs in December — the most since March 1985. EIA expects crude oil output to average 8.46 million barrels per day this year, but increase to 9.24 million barrels per day on average in 2015,
But even higher U.S. oil output has not been enough to satisfy rapidly growing world demand, pushing up gas prices. EIA says that on May 12th, the national average gas price was $3.67, up 7 cents from a year ago. Diesel prices were at $3.95 per gallon last week, up 82 cents from a year ago.
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