The resurgence of rigs extracting tight oil, also commonly called shale oil, has the potential to propel US oil production to a new all-time high by the end of this year according to a monthly report on oil market trends by Rystad Energy.
The current all-time high of 10 million barrels a day (MMbbl/day) was recorded in 1970, a time when a barrel of US crude sold for less than $3. US production later approached this record in April 2015 with 9.6 MMbbl/day, but plunging oil prices led to a 1MMbbl/day decrease over 18 months as many US rigs struggled to compete at the new price.
Rystad Energy points to how recent US production has grown twice as fast as it declined to reach 9.4 MMbbl at the end of May. This contradicts the opinion of many analysts that the current oil price of around $50/barrel is insufficient to fuel growing US production, implying that US producers are finding more ways to produce oil at a lower breakeven price. As a result, the EIA has frequently needed to revise its production estimates upwards.
With the modest growth in production from the Gulf of Mexico being offset by declines from other conventional fields, tight oil seems to be largely responsible for the faster-than-expected increase. Oil giant ExxonMobil, which makes the Mobil Unirex EP2 grease, has invested heavily in US tight oil recently, seeing it as a way to generative attractive returns even at a $40/barrel oil price.