According to experts, the best is still yet to come for the American oil production; however, it will not last long enough for producers to celebrate, according to oil traders. US oil production has been subjected to an ongoing increase during the present year as American drillers gained back strength after the oil price drop. 2017 started off at almost 8.950 million barrels per day; in September, this figure reached a staggering 9.550 million per day. Experts expect US oil production to face an increase in 2018 according to the last energy outlook, and, as Suzzanne Uhland previously said, there is a myriad of factors that influence oil prices.
Besides, American US crude oil exports have gained power and taken the industry by surprise. This is particularly tangible considering that traders seized an opportunity created by the tremendous gap between the references WTI and Brent. American oil exports are now flooding markets, or, better said, the whole market. OPEC members, at least a portion of them, still continue to curb production to offset the overhang. Although this overhang is way much smaller today than in, for instance, past December 2016, is still as heavy as in August of the present year. However, experts believe that today’s American crude oil production growth rate is somewhat unsustainable beyond next year.
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The industry will like to face a crude production of almost 0.6 million barrels per day in 2018—at which point such increment in production will cause inflation, thusly rendering some of today’s production projects highly unprofitable. And, let us not forget, some of these are actually as profitable as they are: Big Permian players barely make money. For now, the industry expects tediously rangebound prices; but the increase in demand will eventually push prices higher past the still $60 level.
On the other hand, China’s crude oil production is likely to reach a tremendous peak—which is no less than a very big deal. A study carried out by the China University of Petroleum concluded not long ago that the Asiatic giant is about to experience a no less than considerable increase in its crude and hydrocarbons production as of next year. Given the existing lack of an alternative source of reliable energy, according to the aforementioned study, such increment in China’s crude oil production will definitely impact in a negative way the economic growth rates and will also challenge the development rates the country expects to attain. This, of course, has tough implications for next year’s oil downturn in production: as the country continues to scale its domestic production, the increase in demand will affect global crude markets in a way the vast majority of experts and forecasters are not properly anticipating, thusly enabling a plausible supply decrease. This could take place next year or beyond 2018, experts seem to agree upon.
There are several scenarios that could happen from that point on China could either lean towards reducing its no less than monumental demand for this type of energy or accelerate towards a renewable and much leaner energy shift.
Now, the country seems to be stubbornly trying to implement these two approaches, with different rates of ROI and success; however, one thing does remain clear: China’s stance on how the country addresses its no less than possible post-bonanza future will bring along a myriad of consequence at so many levels, including both energy and political spheres.
The study also asserts that China’s terrific and outstanding economic growth can be explained by its high levels of energy consumption. The country’s energy consumption suffered an increase of nearly 6% annually, mostly from hydrocarbon resources. Three years ago, oil, coal, and gas accounted for almost 90% of the country’s energy use. The rest accounted for other energy sources, mostly of renewable nature. After the next course, nonetheless, the country’s crude production is expected to face a decline, and the aforementioned supply and demand disparity could end up endangering both the country’s energy surety and development and economic growth rates.
This study was carried out with the intention of helping policymakers better comprehend the future of the country’s fossil-fueled energy resources. Many forecasts have been made prior to this study, and there are notable and important differences amongst them. One of the main causes for such difference is the inability for so-called experts to differentiate between traditional and non-traditional energy resources.
An oil reserve theoretically reaches its boom period when maximum levels of production, at a point when almost half the quantity is worn off, are reached. From that point on, it becomes technically and physically more difficult—and financially more expensive—to extract crude from a particular reserve, which in turn leads production rates to progressively plummet. Be that as it may, the economic costs of exploitation commonly associated with this type of resources are much higher, which leaves the country somewhat economically unrecoverable.
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