&l;img class=&q;dam-image bloomberg size-large wp-image-43216862&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/43216862/960x0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Oil rigs stand in the Permian Basin area of Odessa, Texas, U.S., on Saturday, Jan. 19, 2019. In the Permian, America&s;s busiest oil patch, a producer needs to blast as much as 60,000 barrels of water into a well every day, along with sand and chemicals, to complete the fracking that cracks open the tight, oil-bearing rock about a mile underground. (Sergio Flores/Bloomberg)
Right now, the Permian Basin is producing about 4 million barrels per day&a;nbsp;of oil.&a;nbsp;For comparison, this is more than any single member of the Organization of Petroleum Exporting Countries (OPEC) is currently producing&a;nbsp;except for Saudi Arabia and Iraq .&a;nbsp;The United States is currently the world&s;s largest oil producer, &l;a href=&q;https://www.reuters.com/article/us-usa-oil-production/u-s-crude-oil-output-falls-in-dec-for-first-time-since-may-eia-idUSKCN1QH2FR&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;recording&l;/a&g; 11.85 million barrels per day in December 2018, according to the EIA. This just edged out &l;a href=&q;https://www.reuters.com/article/us-russia-oil-output/russian-oil-output-reaches-record-high-in-2018-idUSKCN1OW0NJ&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;Russia&l;/a&g;, which produced 11.16 million barrels per day.
Record oil production has been a boon for the U.S. economy. Oil exports have also increased, as have the number of countries now importing U.S. oil and oil products. However,&a;nbsp;the story&a;nbsp;is not just one of growing production, more trade and lower energy costs for Americans. Just as U.S. production is &l;a href=&q;https://www.eia.gov/outlooks/steo/report/us_oil.php&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;forecast&l;/a&g; to grow to 13.2 million barrels per day in 2020,&a;nbsp;global demand for oil is &l;a href=&q;https://www.cnbc.com/2019/02/19/oil-markets-brent-crude-futures-us-china-trade-talks-opec-in-focus.html&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;expected&l;/a&g; to grow at a slower rate. &l;a href=&q;https://www.worldoil.com/news/2019/2/14/shrinking-demand-may-necessitate-opec-production-cut-extension&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;Three&l;/a&g; of the &l;a href=&q;https://www.reuters.com/article/us-eia-monthly-demand/eia-cuts-2019-world-oil-demand-growth-forecast-idUSKCN1Q1228&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;major&l;/a&g; oil forecasting agencies, OPEC, the IEA and the EIA recently lowered their demand growth forecasts by as much as 60,000 barrels per day. These are driven by growing &l;a href=&q;https://www.cnbc.com/2019/03/04/kyle-bass-predicts-us-interest-rates-will-head-back-to-zero-in-2020.html&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;indications&l;/a&g; that global economic growth is slowing in 2019 and &l;a href=&q;https://www.cnbc.com/2019/02/18/no-recession-but-global-growth-will-slow-down-janus-henderson-says.html&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;we may face&l;/a&g; a recession as soon as 2020. China, which has been a major oil consumer is also&a;nbsp;seeing waning economic growth and has &l;a href=&q;https://www.wsj.com/articles/china-expects-2019-economic-growth-of-6-to-6-5-11551748675&q; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;already&l;/a&g; lowered its own growth forecasts for this year. Exxon and Chevron don&s;t appear phased by these troubling demand forecasts and indicators, perhaps because if faltering demand does start to impact producers in the Permian, those two companies will still have a leg up over the smaller and highly&a;nbsp;leveraged fracking companies.
Growing&a;nbsp;production in&a;nbsp;the Permian will also exacerbate current issues of crude quality.&a;nbsp;The Permian produces light crude oil, a type which is&a;nbsp;oversupplied on the market today. Heavier crude oils, like the ones produced in&a;nbsp;the&a;nbsp;Venezuelan and Canadian tar sands are in much shorter supply. Many refineries around the globe are not designed to run optimally on just light crude oil and need a mix of heavy and light crudes. This could mean that as oil production from the Permian grows and demand growth drops, U.S. oil&a;nbsp;will have an increasingly harder time finding customers on the global market.
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