Oil prices have been falling in recent weeks, and a large reason for that is credited to an uptick in U.S. oil production, Marketplace Business News reports.
In the federal Energy Information Administration’s (EIA) recent forecast of U.S. oil production, producers were putting out almost 13.5 million barrels a day last month. The numbers represent a million barrels a day more than what EIA estimated a year ago.
OPEC’s production cuts have been helping raise oil prices, with prices reaching $80 a barrel this time last year. In response, oil producers in the U.S. saw an opportunity for profit, resulting in record oil production in the country.
Seeing as the number of oil rigs has not increased, an increase in efficiency has been cited as a reason for the rise in U.S. oil production. Recent mergers taking place within the fracking industry have incentivized oil producers to push for an increase in revenue.
“They’re going to have to justify those acquisitions,” explained Tom Seng, a professor who teaches energy finance at Texas Christian University. “And the way you do that is you get out there, you develop, you increase production, so that your revenue from these properties goes up.”
That increased production has helped prices fall, and in turn could mean a rise in demand. However, as Matt Smith of the data and analytics firm Kpler noted, interest rate increases from the Federal Reserve could cause a slow in demand for oil.
“So as that demand gets ratcheted down a bit, that could weigh on prices further,” said Smith.
