Texas is the top crude oil and natural gas producer in the United States, accounting for a significant portion of the nation’s total output, around 43% of U.S. crude oil production as of last year.
Right now, there are many oil industry offices from Houston to Irving watching an interesting development right now: From Brazil to Canada and other points around the globe, oil production is up.
Matt Smith, lead oil analyst for the Americas at Kpler, joined the Texas Standard for some analysis of the global oil industry.
This transcript has been lightly edited for clarity:
Texas Standard: Well now, is it true that we’ve got Brazil pumping out more oil, and Canada as well?
Matt Smith: We’ve got a whole number of different countries, to be honest. So if we start with Brazil, Brazil production is pushing above 4 million barrels per day here. And so, yes, they have been increasing. They are at a record. It’s a similar situation with Canada as well, kicking around 5 million barrels a day of production.
But it isn’t just those two countries. There’s other Latin American countries as well. There’s Guyana. We’ve probably heard about that, where they basically weren’t producing anything last decade. And then they’ve brought on four crude streams. So each crude stream adds about 200,000 to 250,000 barrels a day.
So it’s simply been stepping up, 250, to 500, to 700. This fourth one came online last month. So next month, they’re looking to get up than 950,000 barrels a day.
And then finally, there’s one more, we’ve got Argentina. And that’s just been gradually increasing. Their production’s gonna go above 800,000 barrels a day, probably late next year. But that’s being driven by onshore production. So that shale production’s similar to the U.S. And it’s a key shale play there called Vaca Muerta, which translates to dead cow.
Let’s put a pin in all of this for just a moment, because over the weekend, I was reading a lot of stories about Ukraine with drone strikes on Russian facilities. Tell us more about how that factors into what we’re seeing in the Americas.
Well, joining the dots just generally in terms of global supply or global exports there, the Ukrainians are doing drone strikes on those refineries because they’re realizing that’s a great way to cripple the Russian oil industry. What that means is that Russia isn’t able to put that crude all through its domestic fineries and so it has basically a building glut of crude.
And so either they may have to shut that in or they may be going to the global market and trying to sell that crude. So that’s one more supplier that is looking to increase exports onto the global market.
Now, it’s a little different though in terms of Russia, because Russia, because of all the sanctions, they only really have India and China that could buy that crude.
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Let’s pull back for just a moment. If you are in one of those oil offices in Irving or Houston right now, what are you thinking this is going to mean for the Texas oil industry?
Well, it’s worrying because so much supply is coming to market and it’s happening right now. You know, it is not happening in three or six months. We can see it playing out in real time. We’re seeing those Brazilian barrels hitting the global market with record exports
Interestingly enough, the U.S. is at a record as well. So in the monthly data from the EIA, the Department of Energy, they showed that U.S. production was at 13.6 million barrels a day in June. That is a record, as well!
That said, because prices are starting to move lower, and today we’re seeing them selling off closer to $62 here, that’s going to start to crimp production in the U.S., and so that will start to drop off. And that’s not to make room for these other countries; it’s simply the result of lower prices.
Speaking of lower prices, what does this add up to for consumers? How will this shake down for them?
It’s a great thing, right? So, the EIA, the Department of Energy, is saying that they expect prices at the pump on the national average to be at $2.90 a gallon next year. This year, it’s about 25 cents higher than that, and it was 15 cents higher this year than last year.
So for Texas that essentially translates to a price averaging $2.50 a gallon next year, which means that we’re going to see dips well below that, as well as perhaps slightly higher too. So it’s got to be a positive thing for consumers.
