Oil Strategists Look at USA Oil Production

Despite pervasive narratives around a supposed lack of shale supply response, monthly U.S Energy Information Administration (EIA) data shows U.S. oil production reaching a record 13.1 million barrels per day in August.

That’s what strategists at Macquarie stated in a report sent to Rigzone on Wednesday, adding that they believe “persistent shale skepticism, coupled with perceived ‘structural underinvestment’ in the global upstream (a view we also challenge), has helped shape a durably bullish oil market sentiment”.

“Indeed, this sentiment may also have influenced an OPEC policy that has tended to err on the side of market support,” the strategists noted in the report.

“Although we do not anticipate an imminent shift in OPEC policy, expect slowing U.S. growth in 1H 2024, and would not be surprised to see shale skepticism perpetuate, we believe the idea that the global upstream, and the U.S. in particular, cannot or will not respond to high prices has grown increasingly tenuous,” the strategists went on to state.

In the report, the Macquarie strategists highlighted that the 13.1 million barrel per day level achieved in August represents a 1.1 million barrel per day year on year increase, “with L-48 land crude rising to 10.8 million barrels per day, roughly 0.3 million barrels per day above December 2019 levels”.

“Within the L-48, Texas and New Mexico increased 65,000 barrels per day month on month. By contrast, the oft-cited EIA DPR had forecast a modest monthly decline from the Permian and Eagle Ford combined in August,” the strategists said in the report.

“This follows outperformance from TX/NM relative to prior DPR expectations for the Permian/EFS in July. While we acknowledge modeling shale supply even on a quarter-to-quarter basis can be extremely challenging, recent implied supply in weekly balances and oilfield labor activity through August have exhibited a bit more resilience than we believe is broadly appreciated,” they added.

The Macquarie strategists stated in the report that, all told, they expect U.S. oil production to exit 2023 at around 13.2 million barrels per day and exceed 13.8 million barrels per day by year end 2024.

“Although the path may prove bumpy and our outlook contemplates improving activity levels, as a general principle, we continue to view the U.S. as responsive (and highly capable) in an accommodative price environment,” the strategists noted in the report.

According to monthly U.S. crude oil production figures on the EIA website, which were last updated on October 31 and include data from January 1920 to August 2023, U.S. field production of crude oil hit 13.053 million barrels in August this year.

This figure came in at 12.959 million barrels in July, 12.894 million barrels in June, 12.694 million barrels in May, 12.650 million barrels in April, 12.770 million barrels in March, 12.532 million barrels in February, and 12.568 million barrels in January, the EIA figures showed.

The month with the highest crude oil output in the EIA figures is August 2023. The month with the second highest output came in November 2019, when production hit 13.000 million barrels per day, according to the figures.

In its latest short term energy outlook (STEO) which was released on October 11, the EIA projects that U.S. crude oil production will average 13.16 million barrels per day in the fourth quarter of this year and 12.92 million barrels per day overall in 2023. The EIA expects this output to come in at 13.12 million barrels per day in 2024, the STEO showed.

According to the STEO, U.S. crude oil production averaged 12.63 million barrels per day in the first quarter of this year, 12.75 million barrels per day in the second quarter, and 13.13 million barrels per day in the third quarter. U.S. crude oil output in 2022 averaged 11.91 million barrels per day, the STEO revealed.

In its previous STEO, which was released in September, the EIA forecast that U.S. crude oil production would average 12.94 million barrels per day in the fourth quarter, 12.78 million barrels per day overall in 2023, and 13.16 million barrels per day overall in 2024.

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