US Oil Output increases, WTI/Brent Spread to decrease

U.S. oil production continues to accelerate at a surprising rate, and the government now predicts the U.S. industry could pump 14 percent more oil this year alone. The use of non conventional drilling techniques in places like North Dakota and Texas has created an explosion in U.S. production to the point where the U.S. is expected to surpass Saudi Arabia in crude production by 2020, according to U.S. government statistics.

At the same time, the industry is developing more pipeline capacity to carry landlocked U.S. crude from storage in Cushing, Okla. to the Gulf Coast refining areas. That should continue to drive the trend, create more refined product for the U.S. and export markets, and bring down some oil prices in the next several years, according to the Energy Information Administration.

In the next few days, a significant pipeline expansion is coming on line as the Seaway pipeline adds 250,000 barrels a day in capacity from Cushing to its current 150,000 barrels. In anticipation, the market has compressed the spread between U.S.-produced West Texas Intermediate and the international bench mark Brent crude, to below $18, the narrowest level since September.

CNBC

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