Oil Prices Continue to Dive as U.S. Production Surges

Oil futures dropped 8% on Friday, the largest one-day decline in more than three years, thanks to booming U.S. production of petroleum from shale.

Since this summer, the U.S. has outproduced Saudi Arabia and Russia to become the world’s largest national oil source for the first time in 45 years, according to the Paris-based International Energy Agency. The group estimates that U.S. output over the past two months averaged 11.6 million barrels per day, compared with 11 million bpd for Saudi Arabia and 11.4 million bpd for Russia.

Other oil producers also have maintained high output, thereby driving up inventories of commercially available crude, The Wall Street Journal notes. Analysts attribute the rise to an overreaction by producers to the impact on global oil capacity of U.S. sanctions on Iran.

Two years ago, similarly bulging oil stockpiles prompted producers—led by the Organization of the Petroleum Exporting Countries, along with Russia and several other independent producers—to trim their own output. That move pushed the price of Brent crude, the international standard, up from about $30 per barrel at the beginning to 2016 to $85 per barrel two months ago.

But petroleum prices have slid by about one-third since then. Shale oil production in the U.S. has nearly doubled over the past six years and shows no sign of a pullback.

Sources tell the Journal that OPEC is likely to discuss a new round of production quotas when it meets in Vienna on Dec. 6, sources tell the Journal. But they doubt that any OPEC action will have enough impact to reduce the global oil glut.