Crude Oil Drops Even Further with Increase of U.S. Shale Production

In the oil market, supply is king. Demand for oil has been relatively consistent over the last couple of years, even despite the development of alternative energies and the rising popularity of electric cars. Supply, on the other hand, has been majorly affected by two related trends. First of all, OPEC has opted to cut production and distribution in an effort to control price drops. As a result, the U.S. market has been flooded with shale in order to make up for the shortfall.
Domestic output has broadly increased in the United States, causing prices to fall. The price of Brent crude, the global oil benchmark, is currently around $50.00 per barrel, while the US benchmark, West Texas Intermediate (WTI) crude, is trading at $47.80 per barrel.
OPEC’s decision to curb oil output last year raised the price of the commodity by 20% – which encouraged serious investment in the US oil shale industry. Investment in oil is booming right now as a result, with The International Energy Agency predicting a 53% increase in investments in US oil production for this year alone.


Output of crude oil in the US hit 9 million barrels per day in April 2017 – a significant increase from the 2008 low of just 4 million barrels per day. At the same time, Saudi Arabia has recently pledged to lower exports to 6.6 million barrels per day starting from next month, making the United States the second biggest producer in terms of daily output. Russia is in the number one spot, having produced a whopping 10.5 million barrels per day in March.
For a long time, the U.S. has fostered ambitions of becoming an oil independent country, and it seems like the actions of the OPEC council have helped to speed things along. Turmoil in the Middle East and political conflicts with Russia have also worked to the advantage of the United States in this regard. Saudi Arabia and the U.S. seem to be on a collision course when it comes to terrorism and handling the jihadis, while Russia has become a focal point in the U.S. political arena due to the rumours that they interfered in the 2016 election.
In any business, the best way to keep the upper hand is to negotiate with a party who needs you more than you need them, and that seems to be the situation that the US has landed itself in right now. With oil output expected to grow by 36,000 barrels a day over the next few months, this pattern seems on course to continue, and will likely have an impact on the geopolitical climate as we know it.

24option Review