U.S. Oil Production Set to Keep Increasing

The increasing U.S. oil output is the primary bearish factor in the oil market, along with slower global demand growth.

Per the U.S. Department of Energy numbers, the domestic crude production is at 12.6 million bpd, some 80% of all U.S. liquids supply.

The industry deployed regular technology and efficiency gains to make up for less CAPEX investment and drilling.

Since July 2018, though, as the average of oil-directed rigs has fallen by more than 20% to the 685 range, crude output still rose by another 1.6 million bpd.

This is a 16-month raise equivalent of nearly equal to Mexico’s total production.

The November STEO of the U.S. Department of Energy has crude production increased to an average of 13.3 million bpd in 2020. It rose from 12.3 million bpd this year.

Also, the IEA’s World Energy Outlook 2019 forecasts that the U.S. will account for 85% of global oil output growth through 2030.

However, constant growth in U.S. crude oil output is not realistic.

A key boosting factor for the industry will export, especially since the new U.S. demand is limited.

Since oil is the world’s significant fuel, the U.S. became a net oil exporter last year for the first time.

By 2022, crude exports expect to double 6 million bpd. Also, by 2024, the U.S. could be the largest crude oil exporter in the world.

In September, the U.S. Department of Energy planned global oil consumption jumps by another 20% by 2050 to over 122 million bpd. It explained why oil investment is an authentic and essential enterprise.

Any slowdown in U.S. oil output could raise prices, which would bring back more drilling and production. Also, any drop in prices would lift more demand while de-incentivizing the use of non-oil energy options.

U.S. Oil and Gas Producers to Cut Spending in 2020

The U.S. oil and gas industry plans another spending freeze next year and a quick slowdown in output growth. Prolific oil and natural gas production pressured prices and squeezed profits. Searing growth in shale fields pushed U.S. crude production to a record 13 million bpd this month.

As output swelled, U.S crude futures fell 7.5% in the third-quarter on worries about global trade tensions. Shareholders fled the sector as returns lagged those of market indexes for years. Shale firms cut spending under investor pressure to improve returns, and the U.S shale supply could underperform in 2020.

Producers said they expect to spend about $4 billion less in 2019 than in 2018. Exploration and production firms released 2020 CAPEX guidance with 15 projecting cuts, five with raise and one unchanged.

The spending cuts jibe with expectations for a sharp slowing in U.S. production growth. The U.S. oil production expects to average 12.3 million bpd for 2019, up by 1.3 million bpd from 2018. The DOE anticipates 2020 growth at 1 million bpd, but analysts expect much slower growth.

JBC Energy researchers anticipate crude production to increase by 780,000 bpd. Contrarily, a falloff in well completions and other factors could cut that to 350,000 bpd or less.

Vice President for North American unconventionals said, going from almost 2 million bpd yearly growth in 2018, an all-time global record, to no growth by 2021 makes it clear that this is a new period of moderation for shale producers.

Occidental Petroleum Corp said it plans to cut capital spending by 40% next year to around $5.4 billion to generate cash and pay down debt.