By The Wall Street Journal
Federal Reserve Bank of Dallas President Robert Kaplan said Thursday U.S. oil production has the potential to rise by more than 2 million barrels a day from current levels due to new finds, improved technology and already-productive fields.
“Based on discussions with people in the industry U.S. oil production could get to in excess of, say, 11 million [barrels a day] or greater,” Mr. Kaplan said at a forum in San Antonio. He was responding to a question on where oil production could normalize after falling to 8.5 million barrels a day from a maximum of around 9.5 million.
The Fed official’s comments come a day after OPEC agreed to cut its own production levels by more than 1 million barrels a day in an effort to boost prices. Some analysts warn that U.S. producers, including those involved in hydraulic fracturing, may ramp up its own production in response to the OPEC deal to take market share from OPEC, a move that could threaten any price rally.
But Mr. Kaplan said he doesn’t believe U.S. producers will move to increase activity and production in a “substantial” way until prices begin to approach the $55 to $65 a barrel range. The U.S. rig count, a gauge of drilling activity in Texas and other oil-producing states, has been ticking higher recently but remains very low compared with pre-oil bust levels.
Kaplan also said the OPEC deal will “accelerate” a rebalancing of supply and demand in oil markets, something that he believes was already in progress before the agreement was sealed.
