Sharpest fall since 1992 expected for US oil output

According to The International Energy Agency (IEA), next year US oil production will experience its biggest fall since 1992.

Low oil prices that have seen prices cut by half in the past year are blamed, together with overall slower economic growth.

Record high

The US oil industry has seen production reach record high in recent years because the high prices attracted investment. OPEC producers in the Middle East have also maintained high levels of production, causing a glut of crude oil on the market.

US crude had a trading price greater than $90 a barrel only a year ago, but today's prices are around half that. UK Brent crude has seen a similar drop in value.

Complicated picture

Relatively new production methods such as fracking have helped US producers by reducing investment and production costs and therefore offset some of the problems caused by low prices.

Also, lower oil prices actually boost demand, which accounts for the reluctance of OPEC countries to cut back on production. As the grouping controls more than a third of the world's oil output, any moves it makes have far reaching effects on the entire oil industry.

Drop figures

The IEA has said that it expects US oil production to drop by 0.4 million barrels a day next year. To put that into perspective, US production grew by 1.7 million barrels a day in 2014.

"Oil's price collapse is closing down high-cost production from Eagle Ford in Texas to Russia and the North Sea, which may result in the loss next year of half a million barrels a day, the biggest decline in 24 years," the industry body explained.

If the figures are accurate, the fall will be the biggest since 1992, when non-OPEC oil supplies fell by one million barrels a day in response to the breakup of the Soviet Union.