U.S. crude oil production will continue to set records, but the pace of growth could be slower than what was thought just a month ago, according to the EIA's latest Short-Term Energy Outlook (STEO) which revised down output estimates compared to the previous month-a first downward revision in six months.
According to the March STEO, U.S. crude oil production averaged 11.9 million bpd in February, down slightly from the January average. The EIA now expects U.S. oil production to average 12.3 million bpd this year and 13.0 million bpd next year, with most of the growth coming from the Permian.
Compared to the EIA's February STEO, the latest estimate lowers the expectation for 2019 U.S. crude oil production by 0.9 percent, from the 12.41 million bpd expected in February to 12.3 million bpd in the March forecast. For 2020, the EIA cut its production forecast by 1.3 percent, from 13.2 million bpd projected last month, to 13.03 million bpd in the March estimates.
The latest projections from EIA are in line with many analyst forecasts which have warned that although U.S. oil production will keep growing, the pace of that growth is not be sustainable over time because many of the 'sweetest spots' have already been drilled out, the decline rates at wells are fast, and because smaller independent drillers are not making money, thus disappointing shareholders who expect returns, not record high production.
The number of active oil and gas rigs fell sharply in the United States in the week to March 1, with the number of active oil rigs falling by 9 to reach 834 and the number of gas rigs falling by 2 to reach 193.
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"The U.S. active oil rig count reached a 10-month low of 834 rigs as of March 8, suggesting the rate of U.S. crude oil production growth could slow," the EIA said in its March STEO.
Although U.S. crude oil production is estimated to have remained near 11.9 million bpd for the past four months, it still expects American oil production to increase by 1.3 million bpd in 2019 and by 700,000 bpd in 2020, the EIA noted.
By Tsvetana Paraskova for Oilprice.com
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Comments
One explanation is that the EIA couldn’t continue with its practice of issuing exaggerated figures about US oil production despite authoritative reports talking about a slowdown in the Permian which contribute more than 60% to US shale oil production.
The EIA claimed that US oil production averaged 10.6 mbd in 2017 when it was actually 9.36 mbd according to the authoritative 2018 OPEC Annual Statistical Bulletin. In 2018, it claimed that US production averaged 11.7 mbd but later it admitted that it was 10.9 mbd. Now the EIA is saying that US production will average 12.3 mbd in 2019 but judging by its record over the 2017 and 2018 figures, we should expect a production of around 11 mbd in 2019.
Philip Verleger, a highly respected economist in the United States wrote in an article titled:” US Oil Production Is Headed for a Quick Decline” he posted on oilprice.com on the 11th of March that he is projecting a decline of 1-2 mbd in US oil production mostly from US shale oil production by 2020. This could translate into a US production range from 10.0-11.0 mbd in 2019 and 11.0-12.0 mbd in 2020.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London