Booming American Oil Could Unseat OPEC As World Leader

In an effort to drive up prices and control the world’s supply, the OPEC oil cartel and Russian government bandied together to reduce excess fossil fuel resources for more than a year. However, the co-conspirators recently received news that will be keeping them up at night.

According to a report by the International Energy Agency, the United States has positioned itself for what is being dubbed a “colossal” boom that could derail their efforts.

Recent U.S. policy changes have urged America oil outfits to press forward toward energy independence followed by “energy dominance” in the words of Pres. Donald J. Trump. The Paris-based energy agency indicated that U.S. oil output could surge to such enormous levels that it would outpace the likes of Saudi Arabia and unseat Russian oil control around the world.

A New Era for American Energy

According to reported data by the U.S. Energy Information Administration (EIA), American output passed 10 million barrels per day for the first time in history during February and has been trending upward since November 2016. Since 2016, oil production has only suffered a minor dip in October 2017 and has sharply improved to current levels.

The recent EIA report pointed to Americans creating a glut during 2018 and potentially hitting 10.4 million barrels per day. Those estimates may need to be revisited as production has vaulted to nearly 10.3 million barrels per day in recent weeks.

“U.S. producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth,” the IEA indicated in its latest monthly report. “This is a sobering thought for other producers.”

The IEA report likened the uptick in American output to the shale surge of 2014 that caused OPEC to take radical measures such as flooding the market to stave off competition. The move by OPEC led to a per barrel price spiral that collapsed cost from more than $100 per barrel all the way down to $27. The strategy hurt oil producers with high overhead. Low fuel prices at the pump helped jump start the American economy and relieve a suffering workforce. However, the volatility in the oil market has unseated other countries such as Venezuela.

Venezuela Falls With Crude Oil Market

No country is as oil rich or as oil-dependent as Venezuela. Crude oil comprises more than 90 percent of all exports, and drives its economy from top to bottom. Along with factors such as corruption and declining infrastructure, U.S. growth and OPEC-Russian market manipulation have upended the economy of the South American nation.

Although government run, Venezuela’s oil output has dipped by more than 20 percent over the last year to only 1.6 million barrels per day. Doubling down on those forces, the U.S. State Department, led by Rex Tillerson, is mulling over a ban on Venezuelan-produced crude as a sanction. Although the sanctions are designed to strip power from Venezuelan Pres. Nicolas Maduro because of a dictator-like power grab, the move could position U.S. oil companies for windfall profits. Much like the coal sanctions against North Korea led to American profits, so would a clamp down on Venezuelan oil.

OPEC-Russian Alliance Faces Stiff U.S. Competition

The OPEC cartel and Russian oil producers hatched an agreement to drive down supply in an effort to boost prices. The lack of output may have buoyed their profits and the accord has been extended through the end of 2018. However, this type of global racketeering may be running out of steam.

Crude oil prices could be free falling again as indicated by a recent 10 percent dip and costs dropping below $60 per barrel already in 2018. The international agency appears optimistic about crude prices remaining reasonably high despite the dip.

“Prices could be maintained at recent levels even as U.S. production rises,” the agency reportedly said. “If so, most producers will be happy, but if not, history might be repeating itself.”

But the push for U.S. energy dominance under the current administration has also unleashed oil drilling. In late January, oil rigs topped out at 759 and Atlantic offshore drilling permits have reopened. Of the future offshore projects, U.S. Secretary of the Interior Ryan Zinke called the move “a new path for energy dominance in America.”

Eighteen of the recently erected rigs are located in western Texas and eastern New Mexico. The region now boasts 427, the highest tally in three years. Experts anticipate that these rigs alone will generate an additional 2.9 million barrels per day by the end of February, or approximately 30 percent of U.S. crude. That reality and the potential for heavy growth in the U.S. industry has 2019 futures already trading under $60 per barrel.

The U.S. oil industry appears poised to accelerate its untapped potential and outpace other oil-producing nations, alliances and organizations.

Regards,

Ethan Warrick
Editor
Wealth Authority


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