EIA forecasts US crude oil production to fall in 2020 and 2021

The U.S. Energy Information Administration (EIA) expects U.S. crude oil production to fall in 2020 and 2021 as efforts to mitigate the spread of the 2019 novel coronavirus disease (COVID-19) continue to result in a steep drop in demand for petroleum products and crude oil prices. In its May Short-Term Energy Outlook (STEO), EIA forecasts that U.S. crude oil production will average 11.7 million barrels per day (b/d) in 2020 and 10.9 million b/d in 2021. These levels would be 0.5 million b/d and 1.3 million b/d, respectively, lower than the 2019 average of 12.2 million b/d.

The benchmark West Texas Intermediate (WTI) crude oil average spot price dropped from $58 dollars per barrel (b) in January 2020 to $29/b in March and $17/b in April. This sharp decline in the oil price is already having a significant effect on drilling activity in the United States. The number of active drilling rigs in the Lower 48 states, excluding the Federal Offshore Gulf of Mexico (GOM), totaled 753 as of February, but it fell to 738 in March and 572 in April, the lowest since May 2016. As of May 8, 2020, the Lower 48 land rig count stood at 355 rigs, according to Baker Hughes data.

EIA’s short-term forecast for crude oil production is separated into three regions: the Lower 48 states excluding GOM (81% of 2019 crude oil production), the GOM (15%), and Alaska (4%). Most of the expected changes in U.S. crude oil production arise in changes in Lower 48 states excluding GOM production because projects in the GOM and Alaska tend to have different development timelines and are less sensitive to near-term price changes.