There’s an Oil Showdown Brewing for 2024

Increasing Output

U.S. oil production has hit a record high this year with more than 13 million barrels per day. There doesn’t seem to be any slowing down in sight either, but that could lead to some geopolitical, or at least global, tensions.

Not every oil producing country is ramping up drilling. OPEC+ (the Organization of the Petroleum Exporting Countries plus other nations including Russia) announced last month to deepen their voluntary output cuts. But now analysts are growing concerned that OPEC member Saudi Arabia could open the taps and flood the market to regain its grip on oil prices.

Competition

Saudi Arabia is thought to have the capacity to ramp up production by millions of barrels per day if it wants to. A sudden oil glut would tank the price of the resource, and hurt U.S. producers in the process. A similar dynamic played out in 2014.

So the showdown depends largely on how Saudi Arabia responds, and U.S. investors will be watching closely.

2024 Oil Boom

The current American oil rush is showing up on company earnings calls. U.S. oil producers ExxonMobil (XOM), Chevron (CVX), and Occidental Petroleum (OXY) have all announced plans to increase spending in the Permian Basin, the highest producing oil field in the U.S.

And that’s not all: There has also been an M&A boom in the U.S. energy industry, including a $12 billion merger Occidental announced earlier this week as producers are trying to position themselves best.

If oil prices suddenly took a nosedive, consumers might benefit from lower prices at the pump, but companies, their workers, and shareholders could get hurt in the process.

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