U.S. oil production is expected to pick up in a big way next year after months of sluggish growth due to a global supply glut, the federal government said Tuesday.
“U.S. crude oil production in 2017 is expected to be more than 100,000 barrels per day higher than previously forecast in response to higher oil prices,” said Adam Sieminski, the head of the Energy Information Administration, the Energy Department’s independent research arm.
Sieminski on Tuesday discussed the agency’s latest short-term energy forecast issued for May, which is much more optimistic in its assessment than even a month ago.
The shale oil and natural gas boom has made the U.S. a leading global energy producer, which has reduced the country’s need for oil imports and has made more oil available on the market. When combined with a drop in demand from China, the market is now oversupplied. The oil glut has prompted many producers to cut production, and with it thousands of rig workers who supported the boom a few years ago.
But even with a rosier forecast, the shift in production won’t occur for almost a year. That leaves the industry struggling until then.
Sieminski says the change in the oil outlook comes from growing demand for fossil fuels in India and China, which will begin absorbing much of the supply during the second half of 2017.
“Higher oil demand in China and India will contribute to a drawdown in global oil inventories during the second half of 2017,” he commented in releasing the new monthly forecast.
There could be a catch for U.S. producers, though, as Iran has begun increasing its oil exports to India after sanctions were lifted earlier this year, according to reports.
But while projecting increased oil production, the agency sees natural gas production beginning to wane over the next few months, slowed by low prices and record-high inventories as the heating season starts in November, he said.
