A similar scenario unfurled in 2016, when Saudi output rocketed just before OPEC agreed to cuts. This time the cartel\u2019s 15 members, and allies including Russia, Mexico and Kazakhstan, will discuss the possibility of their second retreat from booming American production in three years.<\/p>\n
OPEC helped create the monster that haunts its sleep. After it flooded the market in 2014, oil prices crashed, forcing surviving U.S. shale producers to get leaner so they could thrive even with lower oil prices. As prices recovered, so did drilling.<\/p>\n
Now growth is speeding up. In Houston, the U.S. oil capital, shale executives are trying out different superlatives to describe what\u2019s coming. \u201cTsunami,\u2019\u2019 they call it. A \u201cflooding of Biblical proportions\u2019\u2019 and \u201conslaught of supply\u2019\u2019 are phrases that get tossed around. Take the hyperbolic industry talk with a pinch of salt, but certainly the American oil industry, particularly in the Permian, has raised a buzz loud enough to keep OPEC awake.<\/p>\n
Price Tumble<\/h3>\n
\u201cYou\u2019ve got an awful lot of production that can come in very economically,\u2019\u2019 said Patricia Yarrington, Chevron Corp.\u2019s chief financial officer. \u201cIf you think back four or five years ago, when we didn\u2019t really understand what shale could do, the marginal barrel was priced much higher than what we think the marginal barrel is priced today.\u2019\u2019<\/p>\n
That shift makes shale resilient to a price tumble. After touching a four-year high in October, West Texas Intermediate, the U.S. benchmark, has fallen by more than 20 percent.<\/p>\n \n<\/div>\n<\/div>\n<\/figure>\n Only a few months ago, the consensus was that the Permian and U.S. oil production more widely was going to hit a plateau this past summer. It would flat-line through the rest of this year and 2019 due to pipeline constraints, only to start growing again — perhaps — in early 2020.<\/p>\n If that had happened, Saudi Arabia would\u2019ve had an easier job, most likely avoiding output cuts next year because production losses in Venezuela and sanctions on Iran would have done the trick.<\/p>\n Instead, August saw the largest annual increase in U.S. oil production in 98 years, according to government data. The American energy industry added, in crude and other oil liquids, nearly 3 million barrels, roughly the equivalent of what Kuwait pumps, than it did in the same month last year. Total output of 15.9 million barrels a day was more than Russia or Saudi Arabia.<\/p>\n The growth was possible because oil traders decided not to be stymied by the dearth of pipelines. They used rail cars and even trucks to ship barrels out of the region. But pipeline companies unexpectedly increased capacity, in part because they added chemicals known as \u201cdrag reduction agents\u2019\u2019 to increase flow. A new pipeline came online earlier than anticipated, and with three more expected between August and December next year, production is poised to soar.<\/p>\n \u201cThe narrative has shifted significantly,\u2019\u2019 said John Coleman, a Houston-based oil consultant at Wood Mackenzie Ltd. \u201cSix months ago, the market expected the bottleneck to ease in the first quarter of 2020. Now, it expects it in the second to third quarter of 2019.\u2019\u2019 \u201cWe\u2019re going to see a re-acceleration of well completions in the Permian in the second half of 2019,\u2019\u2019 said Corey Prologo, head of oil trading in Houston at commodity merchant Trafigura Group Ltd. \u201cThe pipelines are going to fill up very quickly.\u2019\u2019<\/p>\n The only obstacle for another surge is export capacity, as most of the incremental output will need to ship overseas. With terminals nearly full, Permian barrels could end piling up in the ports of Corpus Christi and Houston.<\/p>\n Even so, few in Houston, or in Midland, Texas, the hub of the Permian region, believe that growth will be anything but gangbusters next year because of the clearing of transportation bottlenecks.<\/p>\n \u201cIt will be a series of events throughout 2019 that occur,\u2019\u2019 said Jeff Miller, chief executive officer of Halliburton Co., the world\u2019s biggest provider of fracking services. \u201cBut it\u2019d be easy to see, as we finish the year, things being perfectly normal.\u201d<\/p>\n \n<\/div>\n<\/div>\n<\/figure>\n By the end of 2019, total U.S. oil production — including so-called natural gas liquids used in the petrochemical industry — is expected to rise to 17.4 million barrels a day, according to the U.S. Energy Information Administration. At that level, American net imports of petroleum will fall in December 2019 to 320,000 barrels a day, the lowest since 1949, when Harry Truman was in the White House. In the oil-trading community, the expectation is that, perhaps for just a single week, the U.S. will become a net oil exporter, something that hasn\u2019t happened for nearly 75 years.<\/p>\n Saudi officials concede that the tsunami is coming. OPEC estimates that to balance the market and avoid an increase in oil inventories, it needs to pump about 31.5 million barrels a day next year, or about 1.4 million barrels a day less than what it did in October.<\/p>\n Global oil demand has so far absorbed the extra U.S. crude barrels, limiting the impact on prices. The loss of output from Venezuela and to a lesser extent, Iran, even allowed Saudi Arabia, Russia and a few others to boost production. But for the cartel, U.S. shale remains as intractable as in the past.<\/p>\n Khalid Al-Falih<\/p>\n<\/div>\n In early 2017, Khalid Al-Falih, the Saudi oil minister, told an industry forum that Riyadh has learned the lesson that cutting production \u201cin response to structural shifts is largely ineffective.\u2019\u2019 The kingdom would only make one-time supply adjustments to react to \u201cshort-term aberrations,\u201d he said, and otherwise allow \u201cthe free market to work.\u201d<\/p>\n Nearly two years later, Al-Falih has lost enough proverbial sleep. He\u2019s about to make a U-turn. He\u2019ll battle what increasingly looks like a structural problem: booming U.S. production.<\/p>\n","protected":false},"excerpt":{"rendered":" The map lays out OPEC\u2019s nightmare in graphic form. An infestation of dots, thousands of them, represent oil wells in the Permian basin of West Texas and a slice of New Mexico….<\/p>\n","protected":false},"author":1,"featured_media":2031,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[46,57,90,96,107,137,139,160,174,184,201,202,209,232,233,244,246,249,256,267,277,279,288],"class_list":["post-2026","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-aramco","tag-baroudi","tag-democracy","tag-doha","tag-embargo","tag-gas","tag-gazprom","tag-international-maritime-disputes","tag-lebanon","tag-maritime-disputes","tag-offshore","tag-oil","tag-opec","tag-putin","tag-qatar","tag-rosneft","tag-roudi","tag-russia","tag-saudi","tag-straddling-hydrocarbons-reserves","tag-total","tag-trump","tag-usa"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/2026","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2026"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/2026\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/2031"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2026"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2026"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2026"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Shale Boom<\/h3>\n
Rail Cars<\/h3>\n
\nKnowing that more transportation would be available next year, Permian companies are drilling wells but, for now, aren\u2019t fracking many of them. Those wells are becoming a reservoir of ready-to-tap production once the new pipelines — Gray Oak, Cactus II and Epic — come online.<\/p>\nTransportation Bottlenecks<\/h3>\n
American Oil Renaissance<\/h3>\n
Saudis Concede<\/h3>\n
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