By Yusuf Khan
The U.S. is pumping more oil than ever, amid better-than-expected demand and supply shortfalls from Saudi Arabia and Russia, according to the International Energy Agency.
In its monthly report, the Paris-based organization said overall supply of crude oil is expected to rise by 1.7 million barrels a day this year to a record 101.8 million barrels a day, thanks largely in part to booming oil production in the U.S., alongside Brazil and Guyana.
The U.S. has “shot ahead” in terms of supply from the big three nations–the other two being Russia and Saudi Arabia–with supply 1.2 million barrels a day higher than it was a year ago, according to the IEA. That is compared to Saudi Arabia, where supply has been cut by 1.8 million barrels a day, with Russia losing a further 170,000 barrels a day since October last year.
Overall, U.S. output is now expected to hit 19.3 million barrels a day this year, a new record for the world’s largest producer. Growth is expected to slow in 2024, with supply only expected to rise by 400,000 barrels a day but this should take the U.S. close to the 20 million barrel a day mark by year-end.
Demand for crude in the U.S. is also strong this year, alongside China, according to the IEA. Chinese demand alone is seen rising by 1.8 million barrels a day this year. In September, China consumed 17.1 million barrels a day, a new record for the country.
The U.S. also showed better-than-expected growth, with demand up by 220,000 barrels a day during the third quarter. More gains are expected toward the end of the year, with total demand in the U.S. expected to rise to an average of 20.18 million barrels a day.
Overall, IEA raised its total demand growth expectation for 2023 by 100,000 barrels a day to 2.4 million barrels a day, taking total demand to an average of 102 million barrels a day.
That said, the IEA expects demand and supply to temper next year, as the effects of slower global growth and high interest rates take hold.
Supply overall is expected to rise by 1.6 million barrels a day, taking average supply to 103.4 million barrels a day. Meanwhile, demand in 2024 is expected to rise by 930,000 barrels a day, taking average demand to 102.9 million barrels a day, leading to a small surplus.
Despite the conflict in the Middle East, the IEA noted that compared to a month ago, concerns around supply have eased. When the Israel-Hamas war broke out, it was feared that the wider Middle East region could become embroiled in the conflict, affecting supply from the region. For now, those fears have abated, with fighting largely limited to the enclave.
Prices have largely followed that trend, with Brent crude rising to $92.38 on Oct. 19, before pulling back to just above $80 a barrel toward the end of last week. Prices on Tuesday were trading at $82.56 a barrel at 0815 GMT.
The IEA said markets remain volatile, especially with heightened geopolitical risks and though the market is expected to be in a small surplus next year, this situation could quickly change.
Write to Yusuf Khan at [email protected]
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