Shale oil declines as OPEC boosts production

SHALE oil production in the United States is projected to decline starting next year. From its peak of 13.5 million barrels per day in 2024, output is expected to drop by 200,000 barrels per day from 2026. This certainly comes as disappointing news for the current U.S. administration, which had hoped to maintain the country’s dominance in the global oil market and retain its status as a top producer for years to come, especially amid competition from major producers like Russia and Saudi Arabia. Adding to the administration’s challenges is its failure to achieve a key objective: lowering domestic oil prices. With U.S. production set to decline, the country will become increasingly reliant on foreign imports, even as domestic consumption continues to rise. The U.S. currently consumes approximately 20.5 million barrels per day and imports around 6.1 million barrels, with about 60% coming from Canada, 7% from Mexico, and the remainder from Saudi Aramco, Iraq, and other OPEC nations. 

The administration will also be disappointed by its continued failure in achieving its objective of reducing oil prices. The US will face a growing reliance on foreign imports, even as domestic consumption rises. Currently, the United States consumes approximately 20.5 million barrels of oil per day and imports about 6.1 million barrels daily, roughly 60 percent from Canada, seven percent from Mexico, and the remainder from Saudi Aramco, Iraq, and other OPEC countries. The current U.S. administration appears to be leaning toward continued reliance on fossil fuels, rather than fully committing to alternative energy sources, and encouraging further investment in oil and gas, without focusing on new alternatives. It is perhaps of the opinion that it is still too early to search for replacements for fossil fuels, especially given the goal of keeping energy prices low and avoiding the higher costs often associated with alternative energy.

The United States still holds substantial oil and gas reserves, and there is a growing push to ease permitting processes and open more federal land for exploration. The aim is to become a dominant force in global energy and reduce dependence on foreign oil, while keeping oil prices low as a cornerstone of U.S. energy policy Meanwhile, OPEC countries must begin thinking seriously about developing a long-term strategy that goes beyond oil. Some member states cannot continue relying on oil as their primary source of income, especially when more than 90 percent of their national revenue depends on it. With current low oil prices, many countries are being forced to borrow from international banks or consider monetizing parts of their oil assets, such as selling stakes in national oil companies, as Saudi Aramco has done. There is no harm in selling a small share, whether 5 percent or 15 percent, and it will not affect our “jewel in the crown,” as long as the country retains full control over its wealth and oil resources. Perhaps the choice could be selling assets, divesting ownership stakes, selling shares in international companies, issuing bonds, or simply borrowing. The final decision depends on overall economic factors, expected returns on investment, and the best financial strategies. Fortunately, there are multiple options, and Kuwait can certainly pick and choose the path that it considers is the best. Recently, the confl ict involving Iran caused global oil prices to surge above $75 per barrel in no time. This raises the question – how fragile are oil prices? In this context, OPEC may not need to take immediate action. Let the political situation take over. However, it is likely that the surge in oil prices is only temporary.

By Kamel Al-Harami
Independent Oil Analyst
 Email: [email protected]