The struggle over the oil market has been well documented over the last couple of weeks, culminating in oil prices swinging wildly. Most recently, we wrote about the precarious balance that Crown Prince Mohammed Bin Salman is trying to strike with both President Trump, as well as President Putin, while OPEC and the oil market both hang in the balance.

The below map shows nothing short of a nightmare scenario for OPEC. Included in a recent Bloomberg article, the map shows new pipelines coming online to support thousands of oil wells in the Permian Basin of West Texas and parts of New Mexico. Over the course of less than a decade, US companies have drilled 114,000 of wells - most of which would turn a profit even with crude prices as low as $30 per barrel.

This is obviously a "nightmare" situation for OPEC that is only gonna get worse. Permian Basin producers are expected to add 3 pipelines and up to 2 million barrels of oil per day next year.

Mike Loya, the top executive in the Americas for Vitol Group, the world’s largest independent oil-trading house told Bloomberg: "The Permian will continue to grow and OPEC needs to learn to live with it."

The surge in production from the United States presents OPEC with arguably one of its biggest challenges in the 60 years it has existed. It also puts Saudi Arabia in a catch-22. If its allies cut production to keep prices higher, shale will thrive, taking market share from them. However, because they need higher prices to make money to support their domestic agenda, OPEC can’t exactly just let prices fall.

And so the US output, combined with softer demand, has ratcheted up the pressure on the cartel. The 15 members of OPEC along with their allies are expected to discuss the next steps they will take during a December 6 meeting in Vienna.

For OPEC, this is really a mess of their own making. They were responsible for flooding the market in 2014, causing prices to crash and forcing US shale producers to get more efficient so that they could thrive with lower prices. As prices subsequently recovered, so did drilling.

Now, growth is speeding up. Some people in Houston are calling it a "tsunami" and a "flooding of biblical proportions" to try and get the point across of how much supply is going to be hitting the market. This type of rhetoric likely has OPEC members on their guard and losing sleep.

Patricia Yarrington, Chevron Corp.’s chief financial officer stated: “You’ve got an awful lot of production that can come in very economically. If you think back four or five years ago, when we didn’t really understand what shale could do, the marginal barrel was priced much higher than what we think the marginal barrel is priced today.’’

Just months ago, the consensus was that the Permian Basin would likely hit a plateau over the summer that would continue through 2019 due to pipeline constraints. It was only expected to start growing again, possibly, in early 2020.

That situation would’ve made things easier for Saudi Arabia who would’ve probably been able to avoid output cuts next year because production losses in Venezuela, coupled with Iran sanctions, would have had the same effect.

Instead, August saw the largest annual increase in US oil production in 98 years according to government data. The American energy industry added nearly 3 million barrels of crude and other oils - roughly the equivalent of what Kuwait pumps. The total output of 15.9 million barrels a day was more than both Russia or Saudi Arabia.

The growth in the Permian Basin was possible because oil traders used rail cars and trucks to ship barrels out of the region in the face of a lack of pipelines. New pipelines came online earlier than anticipated and three more are expected to come online between August and December of next year.

John Coleman, a Houston-based oil consultant at Wood Mackenzie Ltd., stated: “The narrative has shifted significantly. Six months ago, the market expected the bottleneck to ease in the first quarter of 2020. Now, it expects it in the second to third quarter of 2019.’’

With more transport options coming online, Permian Basin companies are drilling wells at an astounding rate.

Corey Prologo, head of oil trading in Houston at commodity merchant Trafigura Group Ltd. told Bloomberg: “We’re going to see a re-acceleration of well completions in the Permian in the second half of 2019. The pipelines are going to fill up very quickly.’’

The bottleneck then may shift to Corpus Christi and Houston, where Permian barrels could end up stacking up as they wait for export capacity to adjust.

By the end of next year, US oil production is expected to rise to 17.4 million barrels per day. At that level, American petroleum imports will fall to 320,000 barrels a day by the end of December 2019. This is the lowest level since 1949. There’s even the expectation that the United States could possibly become a net oil exporter for a week – something that hasn’t happened in 75 years.

And the Saudis know this onslaught of production is coming. OPEC is estimating that to balance the market and avoid a glut, it needs to pump about 1.4 million barrels less per day that it did in October. Oil demand has so far absorbed the extra US crude, preventing it from having a marked impact on prices. That can't last forever.

Going back to 2017, Saudi oil minister Khalid Al-Falih said "that cutting production 'in response to structural shifts is largely ineffective.'"

Let’s see how he handles booming US production in the year to come.