Crude oil prices are shaking off the stock market turmoil and now focusing on a surprise drop in weekly supply, as reported by the American Petroleum Institute (API). Yet, with the rebound in stocks and a reduction in fear and turmoil, why wasn’t oil higher? Well, perhaps because of a report from the Energy Information Administration (EIA) that will rock the world as we know it.
The EIA reported that the United States, which has been a net energy importer since 1953, will be on track to become a net energy exporter by 2022. Take a minute to let that sink in. Despite years of fears about the world running out of oil, or about the comments that we could never drill our way to energy independence, we will now be a net exporter.
We knew this day was coming. Just a few years ago the full gravity of the potential of the shale revolution was not understood by many. Yet, not only has the shale revolution changed the outlook for the U.S. economy but the economies of the world. It also has put us in a better position from a geopolitical risk standpoint as we are no longer dependent on foreign sources of oil. Yet, at the same time the lack of investment in big oil projects still is a threat to oil prices in the future, but at least, let us enjoy this moment.
The EIA in their Short-Term Energy Outlook also raised their forecast for U.S. oil production. The EIA estimated that U.S. crude oil production, which averaged 10.2 million barrels per day (b/d) in January, was up 100,000 b/d from the December level. The EIA estimated that total U.S. crude oil production averaged 9.3 million b/d in 2017 and will average 10.6 million b/d in 2018, which would mark the highest annual average U.S. crude oil production level, surpassing the previous record of 9.6 million b/d set in 1970. EIA forecasts that 2019 crude oil production will average 11.2 million b/d.
While we still say that those estimates are probably inflated by about 5%, they still reflect what we predicted many years ago, and that was the United States was going to be the world global hub of energy.
The EIA also reported some very bearish news for natural gas. The EIA estimates that U.S. dry natural gas production averaged 73.6 billion cubic feet per day (Bcf/d) in 2017. EIA forecasts that natural gas production will reach 80.3 Bcf/d in 2018, establishing a new record. That level would be 6.7 Bcf/d higher than the 2017 level, and the forecast 2017 growth would be the highest annual average growth on record. EIA expects natural gas production will also increase in 2019, with forecast growth of 2.6 Bcf/d.
This is great news considering we were running out of gas just a decade or so ago!