Whether crude costs $60 a barrel or twice that amount, the U.S. is almost free of depending on imported energy and positioned to supplant Saudi Arabia as the world’s No. 1 producer of oil.
Even if U.S. benchmark West Texas Intermediate oil drops 30 percent from the current $86 a barrel, oil companies will boost production as new technologies allow them to extract crude from shale formations, said Ed Morse, the global head of commodities research at Citigroup Inc. The nation, which was last self-sufficient when Harry S. Truman was president in 1952, met 83 percent of its energy needs in the first eight months of this year, according to the Energy Department in Washington.
Saudi Arabia can’t afford a decline of that magnitude after the government pledged an unprecedented $630 billion on social welfare and building projects. The kingdom, which uses Brent crude to help set export rates, couldn’t meet those commitments if prices fell 25 percent from the current $109 a barrel, according to Samuel Ciszuk, an oil consultant at KBC Energy Economics in Walton-on-Thames, England.
“U.S. shale oil producers can’t lose,” Leo Drollas, the chief economist at the London-based Centre for Global Energy Studies, which was founded by Saudi Arabia’s former oil minister, said in a Dec. 10 telephone interview. “The Saudis really need to balance their budget at about $95. For the U.S. producers, that is more than ample.”
U.S. average daily output will climb 14 percent this year, the most in six decades, according to the Energy Department, as Anadarko Petroleum Corp. and Chesapeake Energy Corp. exploit new deposits from North Dakota to Texas. Even though America’s 6.8 million barrels a day in November was 30 percent less than Saudi Arabia’s 9.7 million, the International Energy Agency says the U.S. will be bigger by 2020.
West Texas Intermediate, or WTI, will rise about 15 percent through 2015, to $100 a barrel, according to the median of 13 analyst estimates compiled by Bloomberg. Brent, the benchmark for Arab Light and Arab Medium grades, may gain less than 1 percent, to $110, the forecasts show.
WTI slipped 35 cents, or 0.4 percent, to $86.42 a barrel at 9:54 a.m. on the New York Mercantile Exchange. Brent for January settlement on the London-based ICE Futures Europe exchange fell 71 cents to $108.79 a barrel. The Organization of the Petroleum Exporting Countries yesterday kept its official production ceiling at 30 million barrels a day.