Analysis: U.S. Crude Output Sets Record Amid Price Rally


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Crude oil production in the United States last week soared 
to the highest on record, U.S. Energy Information Administration data released 
Thursday (9/10) showed. Prolonged periods of high crude prices sparked by the 
now six-month long Middle East supply shortage have disrupted a multi-year-long 
trend of fewer but more efficient oil rigs, with production from new rigs 
propelling weekly crude oil output to an unprecedented 13.95 million bpd in the 
week ending September 4.

   This trend was set to continue before the start of the U.S.-Israeli war on 
Iran. Prior to the escalation, production and exploration firms polled by the 
Federal Reserve Bank of Dallas expected an average crude oil price in a range 
high enough to cover expenses for existing wells, but below the $62-$70 bbl 
threshold required to profitably drill new wells.

   This changed once it became evident that the Hormuz crisis would not be 
short-lived. The number of active oil rigs has been on a steady increase since 
the end of May, and, given the typical three-to-six-month delay between 
investment decision and extraction of the first barrel, we may yet see more 
rigs come online over the coming months.

   U.S. crude production has a history of surprising to the upside, as 
efficiency gains have over the years continued to outweigh the decline in the 
number of operations. Now that both the tapping of drilled but uncompleted 
wells and the drilling of new ones has over the past few months looked to be 
highly profitable, U.S. oil output is likely to soon breach the 14-million bpd 
mark and stay far above it throughout this year and the next.

   The EIA in its latest Short-Term Energy Outlook published Wednesday (9/10) 
forecast crude oil production to average just over 14 million bpd next quarter 
and steadily increasing throughout 2027 to reach 14.39 million bpd by the end 
of next year. The Permian is set to be the main source of the additional 
barrels. The region, which produces a little less than half of U.S. crude oil, 
is expected to account for 79%, or 340,000 bpd of the 430,000-bpd forecasted 
year-on-year increase.  

    

    

    




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