U.S. oil output outstrips imports in major milestone
NEW YORK (Reuters) - U.S. crude oil production in October exceeded imports for the first time in nearly two decades, starting a trend that is likely to continue for the foreseeable future as the country benefits from one of the biggest oil booms in history.
The Energy Information Administration said on Wednesday oil production in October was 7.7 million barrels per day (bpd), the highest for that month in 25 years, which surpassed net imports of 7.6 million bpd.
It is the latest milestone reached by the world's largest oil consumer after the shale oil revolution reversed declining output and gave fresh momentum to the oil industry in states such as North Dakota and Texas.
"I think this is huge and it's another step in this revolution that we're seeing in the energy market," said Phil Flynn, an energy analyst at the Price Futures Group in Chicago.
"We're seeing our reliance on imports of crude fall every day."
In its monthly Short Term Energy Outlook, the EIA forecast U.S. oil production rising to 8.88 million bpd in December 2014 and average 8.49 million bpd throughout that year.
Imports, meanwhile, will fall to as low as 5.8 million bpd in December next year and average 6.54 million bpd for the year. The EIA forecasts show production outstripping net imports for every month until the end of 2014.
Net petroleum imports into the United States were at 5.67 million bpd, their lowest since 1991, according to the EIA's monthly Short Term Energy Outlook.
The White House said the country had crossed a "historical milestone in energy independence" and credited falling oil demand to President Barack Obama's policies of increasing vehicle fuel efficiency and encouraging biofuel production.
(For a graphic showing U.S. crude oil production and imports, click here: link.reuters.com/xyr64v)
U.S. output including natural gas liquids and biofuels has swelled 3.2 million bpd since 2009, the fastest expansion over a four-year period since a surge in Saudi Arabia's output from 1970-1974, according to energy consultancy PIRA.
The U.S. October production rates are the highest since May 1989, according to EIA data. Output had been broadly declining since the late 1980s until around 2010 when the results of shale drilling kicked in.
While the existence of shale oil had been known for decades, few thought it would be economically viable to exploit the resources due the expensive technology and the extensive drilling needed for that particular geological play.
But by combining horizontal drilling, which reaches more of an oil reservoir that is shallow but expands across large areas, with hydraulic fracturing, where rock is fractured using water and chemicals to ease the oil out of the reservoir, the shale play was finally cracked.
With U.S. crude oil exports virtually banned, the boom has benefited U.S. oil refineries by providing them with plentiful and cheap feedstock.
Some in the industry have been speculating whether export restrictions -- imposed after the 1970s Arab oil embargo provided a rude awakening to the dependence of the country on foreign oil -- could be eased in years to come.
"This is the point we've been trying to get to since the 70s when we thought, gosh, we can be held hostage. Every president since then has been talking about the need for energy independence," Flynn said.
"Some natural gas and liquefied natural gas exports have begun and if that goes fairly well, it may have the U.S. revisit some of the rules we put in place after the crisis in the 70s and rethink some of those policies. That's how different the world is now," he said.
Refiners, however, are free to sell gasoline and diesel and other fuels abroad without restriction. Exports hit an record high in September of 3.4 million bpd, EIA data shows.
Rising production out of shale plays such as the Bakken in North Dakota and the Eagle Ford in Texas, coupled with pipeline bottlenecks, has caused cash and futures prices for U.S. oil to fall.
WTI, the U.S. benchmark futures contract, traded at a discount of more than $20 earlier this year against international benchmark Brent, although that has since narrowed.
"EIA forecasts that growing non-OPEC crude production will continue to outpace refinery demand, leading to an average WTI discount to Brent of $10 per barrel in the fourth quarter of 2013 and $8 per barrel in 2014," EIA head Adam Sieminski said in a statement.