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Sustained high levels of US crude production in the face of ever-falling oil prices continue to confound Saudi Arabia’s market share prioritization strategy. In leading Opec countries into maintaining high production levels, the kingdom and its allies calculated that the resultant oil price fall would drive higher priced competitors, such as the US, out of the market. They were right about the first half, but, although US output has begun to fall in recent months, their desired price recovery remains elusive.
US crude production continues to defy both the collapse in oil prices and the country’s 16-year low rig count numbers (see p19), posting an average of 9.4mn b/d in 2015 – up a further 100,000 b/d on the figure the US government’s Energy Information Administration (EIA) was predicting even a month ago – versus 8.7mn b/d in 2014. It does however estimate a larger fall in crude output in 2016, though even then output will only fall back to 2014’s level of 8.7mn b/d. The 700,000 b/d fall in output predicted in the EIA’s January Short Term Energy Outlook, released this week, is a 200,000 b/d bigger fall than that predicted in last month’s report – though half of this is down to the higher baseline.
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