US Crude Oil Production Projections Climb Higher Driven by Increased Well Productivity and Prices

The August Short-Term Energy Outlook (STEO) has raised the projected U.S. crude oil production for the Lower 48 states (L48) in the years 2023 and 2024. This adjustment is attributed to the combination of improved well productivity and higher expected crude oil prices compared to previous estimations.

In this same STEO release, it is anticipated that crude oil production in the L48 during the latter half of 2023 will reach an average of 10.6 million b/d. This reflects a noticeable increase of 360,000 b/d from the figures presented in the July STEO. Additionally, the forecasted L48 crude oil production for 2024 has been revised upwards by 240,000 b/d in comparison to the previous July STEO projection, now standing at 10.8 million b/d.

This upward adjustment to the U.S. crude oil production outlook is notable, particularly in the context of recent declines in rig counts. Data from Baker Hughes indicates that, during the week of August 18, 2023, 520 oil-directed rigs were operational in the United States. This represents a reduction of 81 rigs compared to the same week the previous year. However, the increase in well productivity has managed to offset the decline in active rigs throughout the course of 2023. Looking forward to 2024, a rise in active rigs is anticipated, which is projected to contribute to the expansion of crude oil production in the latter part of the year.

The driving force behind the predicted growth in L48 crude oil production remains centered on activities in the Permian Basin. Forecasts indicate that production in the Permian Basin is on track to rise by 430,000 b/d between January and December of the current year. This growth figure surpasses the projected total L48 production growth (410,000 b/d) for the same time frame. This divergence stems from predicted production declines in other regions that partially offset the expected growth in the Permian Basin.

In the August STEO analysis, a forecast of Brent crude oil prices indicates an average of $87 per barrel (b) for the period from August to December 2023. This is an increase from the previous July forecast of $79/b for the same duration. The rise in crude oil prices is primarily attributed to extended voluntary production cuts in Saudi Arabia, in addition to the anticipation of heightened global demand. The confluence of these factors—the production cuts and an increase in demand—is projected to lead to a reduction in global oil inventories and consequent upward pressure on oil prices throughout the remainder of the year.