Rising U.S. oil production – led by the country's shale revolution – will help neutralize supply disruptions from Libya and Iraq, making global markets less vulnerable to price shocks.
Abundant U.S. supply, together with the possible return of Iranian crude exports, will guide prices lower, possibly forcing the Organization of Petroleum Exporting Countries (OPEC) to cut production this year if benchmarks fall well-below $100 a barrel, traders and analysts say.
(Read more: US crudeproduction continues relentless rise: IEA)
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The U.S. – the world's largest energy consumer – is set to overtake Saudi Arabia and Russia as world's largest oil producer, raising production by a projected 1 million barrels a day next year, the third annual increase in a row, Deutsche Bank said in a Jan. 14 report.
"Rising U.S. oil supply growth alone is sufficient to effectively take the edge out of geopolitical risk for the oil market," said Soozhana Choi, head of energy research at Deutsche Bank. "While the U.S. shale oil revolution has more often than not been framed within a North American context, the pressure is coming to bear on the global oil balance."
(Read more: Oil pricecaught up in fallout from Iran nuclear deal)
Global oil balances are looking increasingly "oversupplied" because of "rampant" U.S. oil supply, Deutsche's Choi said, while the expected normalization of Iranian oil exports "poses meaningful downward pressure on oil prices."
Technological breakthroughs in the upstream oil and gas industry have helped accelerate the extraction of hydrocarbons trapped in shale rock formations though opponents claim this is causing major environmental degradation.
