How Will USA Oil Production Evolve to 2023?
U.S. crude oil supply will only marginally increase this summer. Thats according to Rystad Energys latest analysis, which forecasts that U.S. crude output is forecast to grow by 60,000 barrels per day to 11.51 million barrels per day (MMbpd) in July and remain at the same level in August. A dip is then expected in September and October to 11.34 MMbpd and 11.41 MMbpd, respectively, followed by a constant, slow growth trajectory commencing in November 2021, when crude output is expected to rise back to 11.55 MMbpd, Rystad Energy revealed. December will see 11.62 MMbpd, and, from January 2022 onwards, output will continue to rise, breaking the 12 MMbpd monthly average from October that year, Rystad Energy projected. U.S. monthly output in 2022-2023 is not expected to match the record 12.9 MMbpd achieved in 2019, as WTI prices are not forecast to remain at the current high levels, Rystad Energy noted. The company added, however, that there is some upside potential if volatility continues. Texas and New Mexico are expected to drive nearly all oil production growth from the second half of 2021 through 2023, while the rest of the country is set to remain in a maintenance mode, producing around 5.3 MMbpd to 5.4 MMbpd over the coming years, Rystad Energy predicted. In its latest analysis, Rystad Energy highlighted that a lot of 2021 crude output by public producers in the U.S. is hedged at much lower price levels than in the $70s, meaning operators book a financial loss which partly offsets physical gains, ultimately disincentivizing extra production. The company also outlined, however, that below 40 percent of the total expected shale oil output in 2021 is hedged, meaning there are many operators that would be highly incentivized by higher WTI prices, especially private producers. Rystad Energy noted that, for them, there could in theory be some upside to production if the higher prices are perceived as a structural change rather than short-term rebalancing. Nevertheless, no major supply response is possible for both types of producers before the second quarter of 2022, Rystad Energy pointed out. The industry is still heavily relying on DUCs completion and to see a serious ramp up in fracking volumes operators would first need to increase drilling, Rystad Energy said. The company also highlighted that operators in 2021 are remaining committed to capital discipline and on returning dividends to shareholders after the previous tough year. To contact the author, email andreas.exarheas@rigzone.com