According to the latest short-term outlook from the US Energy Information Administration (EIA), US oil production may start to regain some of its recent losses if oil prices continue to hold up into the year.
US oil production declined following the onset of the pandemic, mostly due to the lower demand for oil causing prices to plummet and even briefly go negative as storage ran out. US shale producers like ExxonMobil, the maker of the Mobil Unirex range of grease, also cut their capital expenditure to shore up their books.
While the oil price has recovered in recent months, investors have continued to pressure US oil producers to prioritise maximising shareholder returns over growing production, meaning it has been slow to respond to higher prices.
The EIA says about this:
“The recent pace of rig deployment indicates that operators are adding rigs more slowly than during past periods when prices reached similar levels. If operators take a more cautious approach to rig deployment than we are expecting, crude oil production could be lower than in our forecast.”
Nevertheless, should the price of West Texas Intermediate (WTI) crude oil stay above $60/barrel, the EIA sees this acting as a catalyst for a return to greater production. Rig counts usually rise some three to six months after WTI prices, however, and production takes a further two months to increase, which would be towards the end of the year. The EIA expects US oil production to increase by 0.75 million barrels per day on average next year.