Record growth in US production hasn't caused a steep fall in prices as most of it is being lapped up by the market and offsets some fall in production from both Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC regions.Barclays Research in a report pointed out that the tight oil supply boom is now almost three years old with the actual US oil growth this year currently at around 700 kbpd. Drilling productivity in shale plays continues to grow rapidly across the six major plays. Oil drilling productivity is growing rapidly at Bakken, followed by the Eagle Ford and Niobrara plays, while the Permian is lagging. This rate of expansion of oil supply is unprecedented.

The growth in US output since 2010, at roughly 2.8 mn bpd, is the most rapid growth achieved by any oil producing country since Saudi Arabia raised its output by almost 3.5 m bpd during the period September 1990 to October 1992, partly to make up for Iraqi output lost during the first Gulf war, Barclays report added.

The rapid rise in US production hasn't caused a bearish market to emerge for crude oil since early 2010. On the contrary, Brent crude is up 37% and WTI up 22% since then in stark contrast to the sharp fall in prices seen in early 1990's when Saudi Arabia ramped up production.

According to Barclays Research, stronger demand than expected has pushed prices higher despite rising US production. Oil demand is expected to rise by approximately 1.1 m b/d compared with a project of just 900kb/d this time last year. Non-OPEC production is also lower than previously forecast. OPEC production forecast for 2013 a year ago was 31 mb/d and above but real production has averaged less than 30.5 m bpd.OPEC hasn't voluntarily reduced output to offset US growth. Lost production in Libya, Iraq and Nigeria has caused OPEC to struggle to meet oil demand. OECD inventories including refined products are 68 mb/d lower than a year ago and are at the bottom of their seasonal range.

If US production hadn't risen higher than expected, Brent crude prices could be trading between $140-155,around $40 higher than current levels, Barclays Research pointed out.

"If US tight oil continues to grow as rapidly as it currently is, then eventually it will begin to exert significant downward pressure on global oil prices, but on current projections that looks unlikely to be the case in 2014."
Source: Barclays