The EIA predicts a surge in U.S. crude production, reaching a record 13.21 million barrels per day (bpd) in the current year, representing a substantial increase of 290,000 bpd.
In a recent report released by the U.S. Energy Information Administration (EIA), it is projected that U.S. crude production will reach unprecedented levels over the next two years, although the growth rate is expected to decelerate. This forecast, outlined in the Short-Term Energy Outlook (STEO), attributes the rise in U.S. output to efficiency gains that counterbalance a decline in rig activity.
The EIA predicts a surge in U.S. crude production, reaching a record 13.21 million barrels per day (bpd) in the current year, representing a substantial increase of 290,000 bpd. This surge is particularly noteworthy as it occurs concurrently with the Organization of the Petroleum Exporting Countries (OPEC) and its allies implementing output cuts in an effort to bolster oil prices.
In contrast, the EIA anticipates a decline in OPEC+ production, excluding Angola, which recently departed the bloc. The projection suggests a decrease of 620,000 bpd, bringing the total to 36.44 million bpd in the upcoming year. This reduction is significant, considering the five-year average of 40.2 million bpd before the disruptions caused by the Covid-19 pandemic.
A recent Reuters survey noted an increase in oil output by OPEC members in December, primarily due to heightened production in Angola, Iraq, and Nigeria. This upward trend offset the ongoing cuts by major oil-producing nations like Saudi Arabia within the broader OPEC+ alliance.
Saudi Arabia’s response to concerns over rising supply and weak demand for light crude involved a decision to cut the February official selling price (OSP) of its flagship Arab Light crude to Asia. This move marked the lowest level in 27 months and reflected the delicate balance oil-producing nations are trying to maintain in a competitive global market.
While the U.S. is poised to set new records in crude production during 2024 and 2025, the EIA suggests that the growth rate is likely to slow compared to the significant 1 million bpd increase projected for 2023. This deceleration is attributed to lower drilling activity.
According to the EIA, global benchmark Brent crude prices are expected to average $82 per barrel in 2024 and $79 in 2025, closely mirroring the 2023 average of $82. The agency cautions, “Although we expect OPEC+ to restrict production to prevent prices from falling, we still anticipate global production to exceed consumption by mid-2025 and therefore for petroleum inventories to increase.”
The report underscores potential disruptions to trade flows and rising prices due to heightened tensions in the Middle East and attacks on ships in the Red Sea. Recent geopolitical events in the region have contributed to a 2% increase in oil prices, with Brent crude futures trading around $77.91 a barrel and U.S. West Texas Intermediate futures at $72.72 a barrel.
Shifting focus to the demand side, the EIA foresees a growth of 1.4 million bpd in global liquid fuels consumption in 2024 and a slightly lower 1.2 million bpd in 2025. This represents a decrease from the robust 1.9 million bpd growth projected for 2023. Factors contributing to this decline include a weaker Chinese economy, increased vehicle fleet efficiency, and the conclusion of pandemic recovery-related growth in 2023.
As the global energy landscape continues to evolve, the delicate balance between supply, demand, and geopolitical factors will play a pivotal role in shaping the trajectory of oil prices and production levels in the years to come.