The U.S. oil surge is set to take a breather this year
News Team
Analysts see U.S. oil output growth slowing down this year.
Why it matters: The U.S. is by far the world’s largest producer and a major exporter, which influences global market balances and prices.
The big picture: Production grew by roughly 1.8 million barrels per day over the past couple of years, Energy Department data shows.
But the consultancy Wood Mackenzie and DOE’s independent stats arm both see companies collectively slowing their roll in 2024.
A Woodmac analysis sees 2024 output showing the effects of last year’s inflationary pressures, consolidation, and declining rig activity.
How it works: “Offsetting base declines gets increasingly difficult at higher production levels, resulting in more production needed just to keep production flat,” Woodmac’s Utkarsh Gupta said in the note.
Your mileage may vary — Gupta notes that smaller private operators have cut rigs, but publicly traded companies will continue with growth plans.
However, public players remain focused on shareholder rewards.
What’s next: Woodmac, looking at Lower 48 states onshore production, sees much lower growth this year and beyond.
That output surged by 900,000 barrels per day last year, defying expectations, but they see things slowing to 270,000 this year and 330,000 in 2025.
DOE’s Energy Information Administration, looking at all U.S. output, doesn’t see production regaining last December’s latest all-time high of 13.3 mbd until February 2025.
What they’re saying: “The ease in growth has gone, unless somebody comes up with a very dramatic new technical innovation,” said Paul Horsnell, head of commodities research at Standard Chartered Bank, tells the Wall Street Journal, in a piece on the shale boom.
Reality check: Getting these look-aheads right is always dicey.
U.S. producers can respond relatively quickly to big price swings in either direction, and a supply disruption in the Middle East can’t be ruled out, to name just some potential wild cards.
For now, however, the market looks well supplied this year as global demand growth appears to be slowing.
The bottom line: U.S. production remains around all-time highs, but 2024 could be something of a gap year when it comes to growth.
