LONDON – The U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of energy from shale rock spurs the country’s economic recovery, Bank of America Corp. said.
U.S. production of crude oil, along with liquids separated from natural gas, surpassed all other countries this year with daily output exceeding 11 million barrels in the first quarter, the bank said in a report Friday.
The country became the world’s largest natural gas producer in 2010. The International Energy Agency said in June that the U.S. was the biggest producer of oil and natural gas liquids.
“The U.S. increase in supply is a very meaningful chunk of oil,” Francisco Blanch, the bank’s head of commodities research, said by phone from New York. “The shale boom is playing a key role in the U.S. recovery. If the U.S. didn’t have this energy supply, prices at the pump would be completely unaffordable.”
Oil extraction is soaring at shale formations in Texas and North Dakota as companies split rocks using high-pressure liquid, a process known as hydraulic fracturing, or fracking.
The surge in supply combined with restrictions on exporting crude is curbing the price of West Texas Intermediate, America’s oil benchmark.
The U.S., the world’s largest oil consumer, still imported an average of 7.5 million barrels a day of crude in April, according to the Department of Energy’s statistical arm.
U.S. oil output will surge to 13.1 million barrels a day in 2019 and plateau thereafter, according to the IEA, a Paris-based adviser to 29 countries.
The country will lose its top-producer ranking at the start of the 2030s, the agency said in its World Energy Outlook in November.
“It’s very likely the U.S. stays as No. 1 producer for the rest of the year” as output is set to increase in the second half, Blanch said.
Production growth outside the U.S. has been lower than the bank anticipated, keeping global oil prices high, he said.
“The shale production story is bigger than Iraqi production, but it hasn’t made the impact on prices you would expect,” said Blanch. “Typically such a large energy supply growth should bring prices lower, but in fact we’re not seeing that because the whole geopolitical situation outside the U.S. is dreadful.”
Territorial gains in northern Iraq by a group calling itself the Islamic State has spurred concerns that oil flows could be disrupted in Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.
Exports from Libya have been reduced by protests, while Nigeria’s production is crimped by oil theft and sabotage.