U.S. oil production reached 7.5 million barrels a day in July

Fadel Gheit, Oil & Gas Senior Analyst at Oppenheimer & Co, on oil and its future price trend

Throughout the last 12 months crude oil had its ups and downs but it did not break the 100$ level. However, that happened a couple of weeks ago and the price has stayed around that level since then. What were the main drivers for this climb, and do you expect it to be a short or long term trend?

I expect oil prices to continue to be impacted by global events including the turmoil in the Middle East, which continues to get worse, keeping oil prices inflated by supply concerns.

Lately there have been some concerns on Saudi Arabia’s oil exports, as the country is almost completely dependent on crude, and it is expected that the world will need less oil in the future. What is your opinion on this matter?

Saudi Arabia’s economy is totally dependent on oil export revenues and its rapid population growth will result in increased domestic oil demand and reduced oil export volume and revenues. The government has failed to diversify the economy and a sharp drop in oil prices could have a serious negative impact on its economy and could destabilize the country.

U.S. oil production reached 7.5 million barrels a day in July, the highest monthly output level since 1991. Do you see the lawmakers removing the limits on crude exports in the future?

It is difficult to predict what Washington will do, but high oil prices should continue to boost domestic production. However, the US is still importing more than 50% of its oil consumption. There is a ban on crude oil export from the US, but light sweet crude production has exceeded domestic demand levels and the industry is calling on Congress to allow swapping light sweet crude for heavy sour crude, which would benefit both oil producers and petroleum refiners in the US.