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Is the US Producing Too Much Oil?

OPEC's production cut had many investors excited for a recovery in oil prices, but the U.S. seems determined to fill in that supply gap.

In this clip from Industry Focus: Energy, Fool energy analysts Sean O'Reilly and Taylor Muckerman discuss how much production is set to increase in 2017, what it means for the oil industry in the next few years, and why so many U.S. companies are making a less-than-opportune decision.

A full transcript follows the video.

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This podcast was recorded on March 23, 2017.

Sean O'Reilly: Couple months ago, OPEC cut production, and everybody was like, "Oh, it's $50, it's coming back, maybe $70 this year." You, very wisely, have been a little less euphoric, enthusiastic.

Taylor Muckerman: Yeah. I feel like we've talked about what's happening months ago, before it actually happened.

O'Reilly: But we have to do it again.

Muckerman: Yeah. OPEC cut, U.S. said, "We're not going to, we're going to ramp it up."

O'Reilly: Fuel Fix -- you sent me a very interesting blog, I was very happy to read this, because it gives some hard numbers for what we're talking about. The headline reads, "Is The Boom Back? Drillers to Spend $25 Billion More in 2017," by David Hunn, it ran on March 16th. That's a lot of money. And also, when I read this, it popped into my mind that Exxon[Mobil] (NYSE: XOM) made that $6.5 billion purchase from the Bass family down there in Texas, of shale property. So now, you have the biggest domestic energy company out there getting in on the game. It's like, "Ugh, we're going to do this again?"

Muckerman: Reminds me of their XTO purchase way back when.

O'Reilly: Oh, gosh, what year would that have been?

Muckerman: That was 2010 or 2011.

O'Reilly: How big was it? Why did you say that reminded you of this?

Muckerman: Because they were trying to get into the shale gas game when prices were sky high, then they fell off. At least now, maybe they're buying at low prices. Could be. Maybe $50 is the new $100. The U.S., like you said, spending is up globally throughout the rest of this year, predominantly in the U.S.

O'Reilly: They're getting so efficient. Yeah, so, what else did you take from this? What did U.S. production peak out at? 10.3 million barrels?

Muckerman: Something like that, we dropped below 9 [million] recently. But now, they're expected to boost another 1 million barrels a day over the next year or two.

O'Reilly: Guys, stop it. Guys.

Muckerman: [laughs] Yeah. They keep getting more efficient.

O'Reilly: Crowe used to talk about how, "These guys only know one thing, these wildcatters, and that's getting out there and finding some oil."

Muckerman: Yeah. If you read the history of some of these guys, The Frackers is a book by Greg Zuckerman? I think?

O'Reilly: I can Amazon it.

Muckerman: I know his last name is Zuckerman, because it rhymes so nicely with my last name, Muckerman. Great book, yeah, the history of Harold Hamm and Aubrey McClendon and a few other infamous wildcatters.

O'Reilly: This is available on Amazon.com and fine bookstores everywhere. It is Gregory Zuckerman.

Muckerman: Gregory, good. My memory serves correctly.

O'Reilly: The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters. Yee-haw.

Muckerman: That book goes back, I think, several decades, and nothing has changed. Oil has just gotten cheaper to produce via fracking. So, if you really want to learn about this, what's going on in the United States, in my mind, that's the book to read.

Sean O'Reilly has no position in any stocks mentioned. Taylor Muckerman owns shares of AMZN. The Motley Fool owns shares of and recommends AMZN. The Motley Fool owns shares of ExxonMobil. The Motley Fool has a disclosure policy.