EIA forecasts growth in U.S. crude oil output to slow in 2021 with a drop in drill rigs
Energize Weekly, February 5, 2020
While U.S crude oil production is set to grow by 9 percent in 2020 to 13.3 million barrels a day, production growth will slow in 2021 due to a decline in active drill rigs, according to a federal Energy Information Administration (EIA).
EIA is projecting a 3 percent increase in production in 2021 over 2020 to about 13.7 million barrels a day.
“Despite the decline in rigs, EIA forecasts production will continue to grow as rig efficiency and well-level productivity rise, offsetting the decline in the number of rigs until drilling activity accelerates in 2021,” the agency said.
The production forecast is based on a price forecast for West Texas Intermediate (WTI) crude with the average price rising to $59 a barrel in 2020 and $62 a barrel in 2021 from a 2019 average price of $57 a barrel.
The price forecast, however, “highly uncertain” and any significant price change could change the pace of drilling and well completion, which would in turn affect production, the EIA said.
The cycle for land-based drilling in the lower 48 states is relatively short so changes in price are reflecting in drilling in a six- to four-month period. Crude oil production in Alaska and offshore in the Gulf of Mexico, about 19 percent of total domestic production 2019, are based on long-term investment and are less sensitive to short-term price fluctuations.
EIA is forecasting a lower WTI price at the outset of 2020 with it rising in the second half of the year, with production mirroring the price trend leading to late year surge in output. The lower 48 states’ production is projected to reach its largest annual average output at 10.9 million barrels a day.
Offshore oil production is projected to grow by 100,000 barrels a day to two million barrels a day and then flatten in 2021 as several projects slated to begin producing in 2021 will not come on line until late in the year. Alaskan production is forecast to remain at 500,000 barrels a day in 2020 and 2021.
The largest region for crude oil production is the Permian Basin, which stretches over West Texas and eastern New Mexico. The EIA forecast the Permian’s output at 5.2 million barrels in 2020, an 18 percent increase over 2019, and an average 5.6 million barrels a day of production in 2021.
The second largest growth area in 2020 and 2021 will be the Bakken region in North Dakota, adding about 100,000 barrels of new crude production each year. Bakken crude production reached 1.4 million barrels a day in December 2019.