U.S. Tipped to Become World's Top Oil Producer - But Russia Ready for Record Output

Russia says its ready for record oil output. File Image / Pixabay

It's been a long-awaited goal in many western quarters, but perhaps because of the widespread loathing of Donald Trump as the U.S. president, nobody is popping champagne corks: on Wednesday, the Energy Information Administration quietly announced that America likely overtook Russia and Saudi Arabia to reclaim its title as the world's biggest oil producer earlier this year.

Further, the EIA expects U.S. output to continue to exceed Russian and Saudi production for the rest of 2018 and in 2019.

But because the EIA doesn't publish forecasts for Russia and the Saudis ,it's hard to verify its claim of America's might: for example, while the agency estimates that U.S. crude and lease condensate output averaged 10.9 million barrels per day (bpd) in August, data from Russia's energy ministry records its output at 11.21 million bpd for the same month.

However, if the EIA's preliminary figures prove correct, "it would mark the first time since 1973 that the U.S. has led the world in output," according to Canada's CBC news agency.

Meanwhile, if nothing else, the U.S. continues to exert considerable influence on the trading market: news on Wednesday that American crude inventories dropped by 5.3 million barrels last week caused West Texas Intermediate to rise $1.12 to $70.37 per barrel, compared to a 59 cent rise for Brent to $79.65 per barrel.

Along with the price rises, and despite the all-but-official word of U.S. world production dominance, fears still persist regarding the impact of U.S. sanctions against Iran; indeed, Alexander Novak, energy minister for Russia, said, "This is a huge uncertainty on the market how countries, which buy almost 2 million bpd of Iranian oil, will act; the situation should be closely watched, the right decisions should be taken."

He also remarked that his country if need be could boost output by as much as 300,000 bpd in the medium-term, which would beat the post-Soviet record set in October 2016 (and perhaps knock U.S. output to second place); however, he added, "We have not yet taken any decisions on production growth, we've just spoken about the potential we have and the spare capacity.

"We will be discussing these decisions and steps we plan to take in Algeria," he said, referring to the Organization of Petroleum Exporting Countries meeting on September 23.

Novak's remarks reinforce the notion, which was recently if hesitatingly embraced by the crude trading community, that Russia, along with Saudi Arabia, may defy critical expectations and be well able to negate Iran's output problems after all.