Higher crude output from the U.S. should pressure global oil prices through the end of 2018, the U.S. government said May 9, ahead of a meeting later this month at which OPEC and non-member producers will discuss extending supply cuts.
"Higher oil production from the United States, along with rising oil output from Canada and Brazil, is expected to curb upward pressure on global oil prices through the end of 2018,” Howard Gruenspecht, acting administrator of the Energy Information Administration (EIA), said in a statement.
The U.S., Canada and Brazil are not among producing countries including Russia who meet with OPEC this month to decide whether to continue output cuts of 1.8 million barrels per day (bbl/d) in an effort to reduce a global crude glut and support prices.
The EIA said it expects domestic crude production to rise by more than expected in 2017 to 9.31 million bbl/d from 8.87 million bbl/d in 2016, a 440,000 bbl/d increase.
Last month, it forecast a 350,000 bbl/d year-over-year increase, according to its monthly short-term energy outlook.
For 2018, the EIA's growth forecast is 650,000 bbl/d, down from its previous forecast of 680,000 bbl/d. Its forecast for total output in 2018 rose to 9.96 million bbl/d from 9.9 million bbl/d.
The rebound in oil prices to around $50 in recent months breathed new life into U.S. producers, who have boosted drilling in shale regions, lifting U.S. output to levels not seen since mid-2015.
The EIA forecast that U.S. oil demand for 2017 will grow 290,000 bbl/d, up from its previous forecast for 250,000 bbl/d growth. For 2018, oil demand is expected to increase by 300,000 bbl/d, down from forecast demand growth of 340,000 bbl/d previously.
Oil sold off last week, as more investors doubted that OPEC-led supply cuts will help reduce the global inventory glut. Prices slid back to levels seen in November before the supply deal was made.
"It's pretty apparent that any sustained rise back above $55 will get more and more shale online," said John Kilduff, a partner at energy hedge fund Again Capital LLC in New York.
"Also, we should start to see Dakota Access pipeline and other infrastructure improvements liberate more and more U.S. barrels. We have only just started to see the real rebound in shale," he said.