Oil prices rose on Friday, but gains were capped by uncertainty about the US-China trade deal, a rising rig count and concerns about global economic growth.
WTI prices are on the rise as the crisis in oil-rich Venezuela deepens as opposition leader Juan Guaido seeks to grab power from current president Nicolas Maduro, garnering him backing from the United States to the ire of Maduro. Gains were capped, however, by the previous day’s EIA report that showed a major buildup in crude oil inventories for the week at 8 million barrels, bringing the total to 9% above seasonal limits.
The price of the US light WTI benchmark was trading up by 0.52 USD (+0.99%) at 53.65 USD per barrel, while Brent crude is trading up by 0.40 USD (+0.65%) at 61.49 USD per barrel.
Overall, the world oil markets remain well-sourced, partly due to US production growth of over 2 million barrels per day last year to a record 11.9 million barrels per day.
The record US production is likely to offset short-term supply disruptions from Venezuela due to possible sanctions on the part of the US, according to the British Barclays Bank. The bank cut its average forecast for Brent’s price in 2019 to 70 USD per barrel.
US oil rig counts and production
Baker Hughes reported a modest rise in the number of active oil and gas rigs in the United States this week.
The total number of active oil and gas drilling rigs rose by 9 rigs, according to the report, with the number of active oil rigs increasing by 10 to reach 862 and the number of gas rigs decreasing by 1 to reach 197.
The oil and gas rig count is now 112 up from this time last year, 103 of which is in oil rigs.
Meanwhile, the US oil production stays at record high levels of 11.9 million barrels per day.
The EIA’s latest Drilling Productivity Report projects shale growth of 63,000 barrels per day in February, a significant but smaller increase than in past months. The relatively slower growth rate suggests the shale industry is pulling back on drilling activity.
The US becomes a net energy exporter in 2020
Thanks to a sharp increase in shale oil production, the US will export more energy than it imports in 2020, according to a study by the US Energy Information Administration (EIA). According to the analysis, this will be the first case since 1953, when US energy exports exceed the imports. And it will happen two years earlier than the initial forecasts.
At the heart of this achievement is precisely the shale revolution that began about ten years ago. New technologies have unlocked many hidden natural gas reserves in individual states, with fossil fuel production rising sharply and reshaping the global energy map.
The end of the 40-year ban on oil exports at the end of 2015 changed the whole game.
According to the EIA scenario, the US will become a net energy exporter in 2020.
For a week in November 2018, US supplies of crude oil and petroleum products exceeded imports, the organization said, which is the first such case since 1991.
Fueled by mining in the Permian basin, most of which is located in Texas, the United States surpassed even Russia and Saudi Arabia in terms of monthly crude oil production in 2018.
The US oil production has increased from approximately 5 million barrels per day in 2008 to a record 10.9 million barrels per day in 2018, according to the EIA.
The International Energy Agency said that last year the United States achieved the most serious annual growth ever recorded in industry history. This growth is likely to continue, albeit at a moderate pace. Under the most likely EIA scenario, the US oil production will continue to record annual records by 2027 and will remain above 14 million barrels per day by 2040.
The boom in shale production has its profound consequences on the economy, national security and, of course, the environment.
Last week, a report by Oil Change International warned that US oil and gas could account for as much carbon dioxide emissions as 1,000 coal-fired power plants. The organization has described this as a “climate crash”.
It is expected that coal-produced electricity will shrink to 17% globally by 2050. At the same time, renewable energy will rise to 31% from the current 18%.
Although the United States is seeking to limit its dependence on foreign energy resources, it will not be able to declare energy independence in 2020.
This is partly due to the complex structure of the American oil industry, which needs a healthy dose of medium and heavy foreign oil. Refiners can not only work with a light oil that the United States is producing at record levels.