In January we talked about the record high United States oil production reached in 2018. Now, we are a few months into the new year, and the U.S. shows little to no sign of slowing…
Based on 11 months of data from 2018 we are seeing an overall increase in oil demand, 0.56 mb/d year over year. Demand for jet fuel and kerosene dropped last year, an increase in demand from the petrochemical and industrial sectors drove into a net positive U.S. demand for the year. 2019 anticipates some growth, though less than the previous few years.
We saw January’s predictions for the U.S. at 12.1 mb/d by the end of 2019 and 12.9 mb/d by 2020, while the February predictions have already been increased to 12.4 mb/d and 13.2 mb/d respectively. This ultimately will bring great economic gains to the basins situated around the U.S. as well as to the other industries supporting their growth, such as valve / flange manufacturers, new opportunities for pipe fitters to fuse a Weld neck flange and a pipe, or to the local stores who welcome the increased customer traffic and revenues. However, such rapid industrial growth put strain on local infrastructure and governments as they try to catch up.
Possible reasons for the underestimation of oil production in the U.S. may be due to the lowering cost of technology paired with greater operational efficiency than expected, but with such a complex beast it is hard to pinpoint any one explanation. With so many changes so quickly in the industry, it can be hard to accurately predict U.S. oil growth. The EIA consistently updates forecast models and KPI’s to close the gap between predictions and reality.
As new data presents itself, be on the lookout for a potential up or downticks in U.S. production/demand. Currently, though, it looks like we are in a positive trajectory and will keep upping production for the foreseeable future. Globally speaking, this could have a long-term negative effect on the price per barrel. OPEC and Russia are working together to stabilize supply/demand by reducing production for the first 6 months of 2019 by approximately 1.2 mb/d collectively, helping stabilize the price per barrel for now. If the United States destabilizes the industry’s supply and demand we could be in for a rude awakening.
Check out our March Update!