U.S. could become world's biggest oil producer in 2018

Is OPEC still relevant?
Is OPEC still relevant?

The United States could soon be pumping more oil than any country on earth.

The International Energy Agency said Friday that "explosive" increases in U.S. oil output would push the country ahead of Saudi Arabia this year and put it in a position to challenge top producer Russia.

"This year promises to be a record-setting one for the U.S.," the IEA said. "Relentless growth should see the U.S. hit historic highs."

That could be enough, it said, for U.S. production to "rival" that of Russia, which has partnered with Saudi Arabia on efforts to keep oil prices high by throttling output until the end of 2018.

The agency, which monitors energy market trends for the world's richest countries, raised its outlook for U.S. production in 2018 to a record 10.4 million barrels.

OPEC and other major producers first agreed to cut production in late 2016, a response to oversupply that sent prices to as low as $26 a barrel earlier that year. They agreed in November 2017 to extend the cuts until the end of this year.

Countries that signed up to the accord have largely kept their word. But the group's efforts at supply restraint have been undermined by the U.S., according to the IEA, which said that a "remarkable" increase in U.S. production last year offset roughly 60% of the cuts.

Still, crude prices are well above $60 a barrel, and the IEA said the market is "clearly tightening."

Related: America's oil and gas output could soar 25% by 2025

Analysts have predicted the U.S. will soon take the lead in global crude production, but Friday was the first time the Paris-based agency put its weight behind the claim.

Oil prices dropped almost 1% after the report was published, reflecting investors fears over possible oversupply.

Related: Will U.S. shale ruin the oil party (again)?

The U.S. energy surge is not limited to just oil.

The IEA expects the U.S. to be capable of producing 30 million barrels of oil and gas a day by 2025, a 25% increase from the current levels.

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