The rise in crude oil extraction from shale in the United States has been lessening the effect of the fighting in Iraq on the price of oil, according to some oil analysts. And a recent report by Barclays says this isn't just a coincidence.
The increased application of methods such as hydraulic fracturing and horizontal drilling has led to a surge in U.S. crude output and kept the price of oil from rising even further during the past month, according to Nansen Saleri, the CEO of Quantum Reservoir Impact, a consultancy in Houston.
Saleri, once the chief of reservoir management at the Saudi Arabian Oil Co., said the U.S. benchmark crude, West Texas Intermediate, has risen only about $5 to $10 over the past 30 days because of concern about the oil flow from Iraq, the second-greatest producer in OPEC. Without the U.S. surge, that increase would have been more like $20 to $30, he said.
During the week of June 8, the production of U.S. crude increased by 17,000 barrels to 8.477 million barrels, much of it from shale extraction. "The surge in U.S. production is a hugely stabilizing factor," Saleri told Bloomberg news.
The surge is not only making up for expected shortfalls from Iraq, but also from Libya and Iran, Christof Ruhl, the chief economist of BP, said in New York.
Meantime, Ruhl said, amid conflicting reports that Iraq's biggest oil refinery has been captured by Sunni rebels of the Islamic State of Iraq and Syria, or ISIS, "nothing has happened to [overall] production" in Iraq. He pointed to uninterrupted oil shipments from southern Iraq, the region with the country's greatest production.
Although prices are rising more slowly than once feared, they're rising enough to cause oil companies to increase annual spending on extraction to $165 billion in the United States during 2014, according to the British bank Barclays.
A report issued June 18 said the bank's analysts expect spending on exploration and extraction should rise by 9.6 percent over 2013. Barclays had previously forecast increased investment, but raised that estimate because of the recent gains made by ISIS in northern Iraq.