US can grow oil output by up to 5 million barrels a day in coming years, says Saudi oil minister
U.S. oil drillers can add millions of barrels per day to the global market, so long as they do so gradually, Saudi Energy Minister Khalid Al-Falih said.
The market can absorb another 3 million to 5 million barrels a day of production from the United States “over a number of years,” according to Falih, who is also chairman of Saudi Arabian oil giant Saudi Aramco. That increase would offset declining output in places like Mexico and the North Sea, he added.
“It’s not a matter of whether the U.S. should or shouldn’t invest in its shale and contribute to the global market supply base. It’s the pace at which it can supply,” he said during an interview on CNBC’s “Squawk on the Street” on the sidelines of the CERAWeek by IHS Markit conference in Houston.
A revolution in drilling methods has allowed U.S. producers to tap crude oil and natural gas from shale rock, leading to an explosion in output that has contributed to a global oversupply of oil. The glut has weighed on oil prices for more than two years.
The Organization of the Petroleum Exporting Countries, led by Saudi Arabia, declined to cut production to balance the oversupply until November — about two years into the downturn. While the output reductions have propped up oil prices, a rise in U.S. production has capped the gains.
U.S. production fell from a recent high of 9.62 million barrels a day in April 2015 to a bottom of 8.56 million barrels in September. Since then, it has rebounded back above 9 million barrels a day, according to preliminary weekly data from the U.S. Energy Information Administration.
It will not be good for the market if the United States increases oil production too strongly in the next two years, Falih told CNBC.
“OPEC obviously will not indefinitely reduce its production and market share to make room for that. So we need to find that balance and grow in line with the market,” he said.