Rising U.S. oil production could hit new records this year after ending 2023 at a record high, putting pressure on OPEC and cushioning the market – at least for now – from price increases that could stem from Middle East tensions. U.S. output has undergone a dramatic recovery since hitting a 62-year low in 2008, according to S&P Global Commodity Insights. By the end of last year, the U.S. produced more oil than any other country in history, according to S&P. And U.S. production doesn’t appear to be slowing down. U.S. crude oil production likely returned to a record 13.3 million barrels per day during the week ended Jan. 12 after briefly falling below that level, according to the latest estimates from the Intelligence Service. Energy. Chevron CEO Michael Wirth believes the U.S. could hit a record in 2024. “I wouldn’t be surprised to see 13.5 million barrels per day this year or even a little bit more than that,” Wirth told Brian Sullivan of CNBC at the Goldman Sachs Energy Conference. earlier this month. Macquarie analysts forecast U.S. crude production to close 2024 at 14 million barrels per day after falling slightly over the winter and rebounding in the second half of the year, according to Walt Chancellor, the firm’s energy strategist. “Call it the North American advantage,” Daniel Yergin, vice president of S&P Global, told CNBC last Thursday at the World Economic Forum in Davos, Switzerland. “Canada and the United States have added one and a half million barrels of new supply to the world market.” Once an important regional benchmark, West Texas Intermediate is increasingly displacing Brent as the top global benchmark, said Adi Imsirovic, a veteran oil trader who is now an energy security expert at the Center for Strategic and International Studies. “You basically set prices for the whole world,” Imsirovic, who is based in the United Kingdom, said of U.S. oil production. Oil prices fail to rebound Oil prices have struggled to rebound despite attacks by Houthi militants on commercial shipping in the Red Sea and OPEC’s promise to cut 2.2 million barrels a day of oil from the market this quarter. West Texas Intermediate futures have fallen nearly 5 percent since late November, when the militant attacks began. US crude prices are nearly 3% lower since OPEC and its allies, OPEC+, announced production cuts. Meanwhile, the price of Brent futures does not appear to be above $80 a barrel “despite two conflicts and a series of terrorist attacks on one of the critical shipping lanes for oil through the Red Sea,” the Bank of America to customers in research. note Friday. It’s impressive that tensions in the Middle East haven’t really driven up prices, Yergin said. The lack of significant price movement is largely due to rising U.S. production, which is rebalancing not only supply and demand dynamics but also global geopolitics, Yergin said. “The psychology of the oil market has changed because the U.S. is by far the largest oil producer in the world,” said Yergin, author of The Prize: The Epic Quest for Oil, Money, and Power. Barring a major disruption, increased oil supply is expected to outpace demand in 2024 due to rising production in the US, Canada, Brazil and Guyana, according to a forecast released by the International Energy Agency on Thursday. Supply is forecast to rise by 1.5 million bpd to a new high of 103.5 million bpd, according to the IOC. Demand will grow by 1.2 million barrels a day, up from 2.3 million in 2023, as the post-pandemic recovery winds down and major economies slow. Oil production in America, particularly the US, puts OPEC in a bind. WTI and Brent ended 2023 down more than 10% and OPEC+ production cuts have so far failed to lift prices. OPEC risks losing customers as the US becomes an increasingly attractive place to do business, with WTI cheaper than Brent and no geopolitical risk, according to Bob Yawger, managing director and energy futures strategist at Mizuho Americas. “The OPEC people run the risk of their traditional customers falling in love with US barrel because of the geopolitical ease of operation,” Yawger told CNBC. “You can just take a boat trip down the beautiful Gulf Coast of the United States and do business in a nice clean way,” he said. The IOC said in its December outlook that “the shift in global oil supply from key producers in the Middle East to the United States and other countries in the Atlantic Basin” is profoundly reshaping global oil trade. U.S. crude exports to Europe, for example, rose to 2.3 million bpd in December as refiners work to offset delivery problems in the Red Sea, according to Matt Smith, chief analyst for the Americas at Kpler . European refiners are shunning Middle Eastern crude and seeking safer supplies from the Atlantic basin, Smith said. Any geopolitical risk premium has been muted thanks to US production, but that would change if tensions in the Middle East lead to a direct confrontation with supply-disrupting Iran. Goldman Sachs, for example, says oil prices could double if there is a prolonged disruption to shipments through the Strait of Hormuz. ‘Golden Age’ Stronger US oil production in 2023 surprised even oil industry CEOs such as Chevron’s Wirth and Occidental’s Vicki Hollub, they told CNBC in recent interviews. “I’m a little surprised at the strength last year,” Wirth told CNBC earlier this month. “I’m not surprised that we’ve seen growth — it’s been a little bit stronger than I think we would have expected.” Chancellor with Macquarie said US output was strong in 2023 because yields were simply attractive: “Prices have been at levels that incentivize incremental supply,” the analyst said. As long as WTI is in the $70 to $80 range strong growth should continue, the Chancellor said. The outlook would begin to tighten if US crude fell to $60, he said. To stop the rally, the price of WTI would probably have to fall to $50, he said. Shale producers have a rough break-even price of $47 a barrel, where the budget is balanced, but they are not making a return, according to the Chancellor. The Saudis do have an “extremely powerful weapon” as OPEC comes under pressure from the US — excess capacity and the threat to flood the market with oil, Imsirovich said. A “significant glut” of crude oil could hit the market in the second quarter if OPEC+ eases its voluntary cuts amid strong non-OPEC output, the IEA forecast in January. “U.S. producers would be wise to be cautious about putting too much supply into the market,” Hollub warned the industry in a December interview with CNBC. If OPEC puts enough oil back on the market, the only solution is to shrink US supply, although that scenario is not in Macquarie’s base case, the Chancellor said. “Unless the OPEC people decide they want to start a price war, this is a golden time for the U.S. producer — or should I even say the Western Hemisphere producer,” Yawger said.