U.S. crude oil output is picking up pace as prices stabilize. However, the increased supply coming out of hydraulic fracturing techniques could cap gains in energy-related ETFs.
The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, has rebounded 13.7% over the past three months as WTI crude oil futures strengthened to $55.1 per barrel.
However, further gains will be hard to come by as U.S. production threatens to undermine the Organization of Petroleum Exporting Countries’ attempt to cut down the global supply glut. According to the International Energy Agency, the U.S. is expected to account for more than 80% of global oil production growth in the next decade and it will produce 30% more gas than Russia by that time, Reuters reports.
“This has implications on the oil markets, prices, trade flows, investment trends and the geopolitics of energy,” IEA head Fatih Birol said at a U.N. climate conference.
Hydraulic fracturing or fracking technology could help the U.S. become the “undisputed leader of oil and gas production worldwide,” Birol added.