U.S. crude oil production will drop by an average of 990,000 barrels per day, according to the Energy Information Administration, for an average of 11.26 million bpd. That is a far greater loss than the agency expected during its previous forecast made in the July Short Term Energy Outlook.
In July, the EIA had forecast that crude oil production in the United States would fall by an average of 620,000 barrels per day for the full year 2020.
The caveat? That the August STEO “remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to the 2019 novel coronavirus (COVID-19) continue to evolve,” the EIA warned.
The assumptions for this month’s STEO were based on macroeconomic forecasts from IHS Markit, which assumes that GDP fell 5.2% in H1 2020, and will rise from Q3 2020 through 2021.
In addition to the reduced outlook for U.S. oil production, the STEO sees high crude inventory levels and excess production capacity as a drag on oil prices in the coming months.
The EIA’s estimate for global liquid fuels production came in at an average 91.8 million barrels per day in Q2—8.6 million bpd less than the same period in 2019, driven by production quotas for OPEC and reduced production in the United States due to low oil prices.
The EIA, however, is expecting U.S. production to average 11.14 barrels per day next year, a small decline than what it was forecasting last month. That is as U.S. oil demand next year is expected to rebound by 1.57 million bpd to 20.03 million bpd.
By Julianne Geiger for Oilprice.com
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Based on the US shale industry’s estimate that it takes 700 rigs to produce an average of 7.0 mbd of shale oil, this means that the remaining 174 rigs have only produced this year 1.74 mbd. Adding this figure to a conventional oil production estimated at 4.99 mbd, we come to a total US production of 6.73 mbd. As a result, US oil production will be struggling this year and the following years to even reach
Of course the US Energy Information Administration (EIA) wouldn’t admit to that level of decline. That is why it is releasing news about the decline by drip.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London