U.S. oil production grew more in 2014 than any year since 1900, according to federal statisticians, a trend that likely influenced Saudi Arabia’s decision in the fall to challenge U.S. shale oil drillers by keeping output steady, in turn lowering global prices on a supply glut.
U.S. output climbed 1.2 million barrels per day, or 16.2 percent, hitting 8.7 million barrels daily last year, the U.S. Energy Information Administration said Monday. Much of the boom came from shale regions in North Dakota, Texas and New Mexico that have become prolific players in the U.S. energy surge.
Crude production has increased each of the past six years and is expected to rise this year and in 2016, the agency said. But it has shaved its forecast by 200,000 barrels per day, down to 9.3 million barrels, for 2015 amid low prices. It projected annual growth of 8.1 percent this year and 1.5 percent in 2016.
“Although oil production is expected to rise in 2015 and again in 2016, the growth is not expected to be as strong as in 2014. Since mid-2014, the price of crude oil has fallen about 50 percent, which has slowed production in marginal drilling areas and focused investment in the more developed areas of tight oil plays,” the EIA said.
Low oil prices are threatening the U.S. shale industry’s strength. The hydraulic fracturing, or fracking, technology used to free up underground deposits of oil and natural gas is costlier than the conventional wells common in the rest of the world. Many companies are finding it difficult to break even with oil fetching about half its price from June, when it cost above $100 per barrel.
The price slump reflects a worldwide oversupply of oil. U.S. production is one part of the story, as are weak global demand — led by a sluggish China — and the Saudi-led move by the Organization of Petroleum Exporting Countries to keep production flowing. The Saudi strategy is ostensibly aimed at regaining market share by bringing U.S. companies to the economic brink. In the past, OPEC’s oil-dependent states typically slashed output to boost prices.
