The US shale oil sector may be down, but it’s not out, according to the US Energy Information Administration (EIA). In its latest annual energy outlook, it says it expects US oil production to exceed its current record for yearly production of 12.25 million barrels per day (bpd) by 2023.
The US shale oil industry seemed invincible at the start of 2020, when crude oil production was as high as 13.1 million bpd. When the pandemic hit, however, and the demand for petroleum products slumped, the price of crude oil plummeted and even briefly went negative when storage became unavailable. While US oil companies like Chevron, the oil major that owns the Texaco lubricant brand, were not obliged to participate in the production cuts led by OPEC, market forces prompted many to pump less crude oil. The EIA now sees this capacity coming back in response to rising oil prices.
The EIA says in the outlook:
“Tight oil is primarily driving the growth in the oil production outlook, followed by offshore resources. Tight oil production from the Wolfcamp play in the Permian Basin (Southwest region) and the Bakken play in the Williston Basin (Northern Great Plains region) leads the growth in US tight oil production.”
The EIA’s reference case assumes a moderate recovery in oil prices. In its scenario for a quicker return to historical oil prices, production also increases faster, while if prices drop even lower than their current level, there will be no return to pre-pandemic production levels.
