The U.S. Energy Information Administration (EIA) announced on Tuesday that U.S. crude production is expected to reach record levels over the next two years, though the growth rate will decelerate due to efficiency gains countering a decline in rig activity.
In its Short-Term Energy Outlook (STEO), the EIA predicts that U.S. crude production will climb by 290,000 barrels per day (bpd) to an all-time high of 13.21 million bpd this year. The rise in output is attributed to efficiency improvements even as rig activity diminishes.
Simultaneously, the EIA anticipates a decrease in OPEC+ production, excluding Angola, which exited the bloc in January. The forecast is a decline of 620,000 bpd to 36.44 million bpd in the coming year, down from a five-year average of 40.2 million bpd before the COVID-19 pandemic.
While U.S. production is projected to continue setting new records in 2024 and 2025 due to enhanced well efficiencies, the growth rate is expected to taper compared to the 1 million bpd increase forecast for 2023, primarily due to reduced drilling activity.
Global benchmark Brent crude prices are estimated to average $82 per barrel in 2024 and $79 in 2025, closely aligning with the 2023 average of $82, according to the EIA.
“Although we expect OPEC+ to restrict production to prevent prices from falling, we still anticipate global production to exceed consumption by mid-2025 and therefore for petroleum inventories to increase,” the agency wrote in its report.
The EIA’s report also warns of potential disruptions and price hikes resulting from heightened tensions in the Middle East and attacks on ships in the Red Sea.
Oil prices experienced a 2% increase on Tuesday, driven by the Middle East crisis and a supply outage in Libya.
EIA expects growth in global liquid fuels consumption to slow to 1.4 million bpd in 2024 and 1.2 million bpd in 2025, influenced by factors such as a weaker Chinese economy, increased vehicle fleet efficiency, and the conclusion of pandemic recovery-related growth in 2023.