U.S. crude production to hit 45-year high in 2015

U.S. crude production will surge to a 45-year high next year, and that could help lower North American crude prices and reduce opportunities for Canadian imports.

In its annual look at world markets for oil, the U.S. Energy Information Administration raised its estimate of U.S. output to 9.53 million barrels a day, the most since 1970.

This year, U.S. output will be 8.53 million barrels a day, up from 7.45 million in 2013.

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American production has been boosted by an abundance of light crude oil which becomes more accessible as the extraction technology improves.

Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in  Texas, North Dakota and other states. U.S. crude production jumped to 8.6 million barrels a day in August, the most since July 1986.

The increased production and a relatively moderate rise in demand has resulted in reduced need for imported crude in the U.S.

“Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports to just 21 per cent of domestic demand, the lowest since 1968,” EIA administrator Adam Sieminski said.

In 2014, an abundance of oil has helped oil prices weather disruptions of supply in Syria, south Sudan and Libya.

Could affect demand for Canadian oil

But it could also affect the need for Canadian crude, especially oilsands production which sells at a discount because of difficulties transporting it to refineries without a pipeline. With no decision yet on the Keystone pipeline and oil by rail facing more restrictions, Americans may find they need less oil from Canada.

The EIA also predicts oil prices will drop in the coming year, with West Texas Intermediate to sell at $94.67 US by 2015, up slightly from the current price of oil, but less than the EIA’s earlier forecast of $96.08.  Canadian oil typically sells at a $15 to $20 a barrel discount to WTI crude.

The EIA also reduced its estimates for 2015 Brent crude to $103 a barrel and estimated the 2015 gasoline price would be $3.41 a U.S. gallon.

Around the world, imports from non-OPEC producers will rise 3.4 percent from 2013 to 55.91 million barrels a day this year.

 “Global oil supplies are expected to grow by 1.3 million barrels a day in 2015, with output growth in the United States accounting for about 91 percent of that,” Sieminski said.

But as growth slows in China, India and Brazil, the accelerating demand for fuels from those countries that drove up the cost of oil in the early 2000s has cooled. However, these countries could take an increasing share of the world’s liquid fuel supply by 2040, the EIA said.

OECD countries are expected to become increasingly energy efficient in the longer term, especially with the introduction of more efficient cars in Canada and the U.S. Demand currently is trending downward because of weak economic growth.