The US oil industry is facing a slowdown in production growth in 2024, according to a report by the US Energy Information Administration (EIA).
The EIA predicts that US crude oil production will rise by 170,000 barrels per day (bpd) in 2024, a sharp decline from the 1.02 million bpd increase in 2023. The agency attributes the slowdown to lower oil prices, reduced drilling activity, and environmental regulations.
Factors behind the slowdown
The EIA estimates that US crude oil production will average 13.21 million bpd in 2024, slightly lower than the record high of 13.3 million bpd reached in December 2023. The agency expects production to recover in 2025, reaching 13.49 million bpd, a new record.
One of the main factors behind the slowdown is the lower oil price environment. The EIA forecasts that the price of Brent crude oil, the international benchmark, will average $77 per barrel in 2024, down from $82 per barrel in 2023. The lower prices will reduce the profitability and incentive for US oil producers to drill new wells, especially in the shale regions.
Another factor is the increased environmental regulation under the Biden administration, which has pledged to reduce greenhouse gas emissions and promote clean energy sources. The EIA expects that the US will impose stricter rules on methane emissions, flaring, and hydraulic fracturing, which will increase the costs and challenges for oil producers.
Implications for the global market
The slowdown in US oil production growth will have implications for the global oil market, which is already facing supply constraints and rising demand. The EIA projects that global oil consumption will grow by 1.4 million bpd in 2024, reaching 102.3 million bpd, surpassing the pre-pandemic level of 2019.
The EIA also expects that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, will continue to manage their output to balance the market and support prices. The group has been gradually increasing its production since May 2023, after cutting it by a record 9.7 million bpd in 2020 to cope with the demand collapse caused by the coronavirus pandemic.
The EIA warns that the global oil market could face volatility and uncertainty in 2024, depending on the pace of economic recovery, the effectiveness of vaccines, the geopolitical tensions, and the weather events. The agency says that the US oil industry will remain resilient and adaptable, despite the challenges and competition.
A hopeful outlook
Despite the slowdown, the US oil industry is not losing its significance or competitiveness in the global market. The EIA notes that the US will remain the world’s largest oil producer and exporter in 2024 and 2025, ahead of Russia and Saudi Arabia.
The agency also highlights the technological innovations and efficiency gains that the US oil industry has achieved in recent years, which have lowered the breakeven costs and increased the productivity of the wells. The EIA says that these factors will enable the US oil industry to respond quickly and flexibly to changing market conditions and opportunities.
The EIA concludes that the US oil industry will continue to play a vital role in the global energy transition, as it provides reliable and affordable energy to consumers, while also investing in cleaner and renewable sources.
Source: Reuters
