US oil production is projected to surge this year at a faster rate than previously anticipated, providing an extra influx of crude supplies to a market that has been constrained by output cuts from Saudi Arabia. The US Energy Information Administration (EIA) indicated in its monthly report released on Tuesday that a combination of better-than-expected well productivity and increasing crude prices will contribute to elevating US production to a historic 12.8 million barrels per day in 2023, up from the previous estimate of 12.6 million barrels per day.
At present, the US is maintaining an average output of around 11.9 million barrels per day. The anticipated rise in US supply is poised to help counterbalance the production curtailments of the OPEC+ alliance. To support prices, the Saudi-led coalition has trimmed output by 1 million barrels per day, leading to production levels that have hit multi-year lows. To exert further control over the market, Saudi Arabia recently extended its output reductions for an additional month.
The EIA’s projection of increased US production aligns with a broader global trend. Worldwide production is anticipated to expand to 103 million barrels per day in 2024, marking a surge of 1.7 million barrels per day from this year. The majority of this growth, about 70%, is foreseen to come from non-OPEC nations, including the United States, Brazil, Canada, Guyana, and Norway.
However, the uptick in production contrasts with predictions of a slight decline in US consumption of refined products this year. Consumption of jet fuel is projected to decrease by 4% in the third quarter. The EIA has adjusted its forecasts to reflect lower consumption of gasoline and diesel for both the third quarter and the full year. On the other hand, a rising demand for natural gas liquids has led to an upward revision in the overall oil demand forecast for the United States.
This anticipated surge in US oil production will introduce an additional source of crude supplies to an already constricted market, primarily due to Saudi Arabia’s output cuts. Non-OPEC countries are poised to play a pivotal role in driving global production to record levels in 2024. Despite the boost in production, a slight reduction in US consumption of refined products is predicted, primarily attributed to minor declines in jet fuel, gasoline, and diesel consumption. The escalating demand for natural gas liquids is expected to partly offset these declines.