EIA forecasts record U.S. oil production this year

The U.S. Energy Information Administration (EIA) released its Short-Term Energy Outlook report, detailing its views on the supply and demand conditions of the energy market over the next few years. The agency believes U.S. oil production will hit record highs, leading to a supply glut in the oil market beyond the first quarter of 2022.

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The EIA forecasts that U.S. oil production will increase by about 500,000 barrels per day in 2022 and 610,000 barrels per day in 2023 to 12.41 million barrels per day. That would surpass the record of 12.3 million bpd set in 2019. U.S. oil production is expected to increase for nine consecutive quarters starting in the final three months of 2021, the agency said.

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U.S. oil production hit a monthly peak in late 2019, but a few months later, the coronavirus pandemic shook global energy markets and forced oil producers to cut output. Oil prices have recovered more than 50% since the second half of last year, but major oil producers are reluctant to restore supplies too quickly, leaving current monthly figures below pre-pandemic levels.

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The agency expects U.S. crude oil production to exceed 12 million barrels per day starting in the fourth quarter of this year. On the demand side, EIA forecasts that US oil demand will increase by 330,000 barrels per day to 20.92 million barrels per day in 2023; US gasoline demand will increase by 90,000 barrels to 9.15 million barrels per day.

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The EIA also forecasts OPEC+ oil supply. OPEC+ oil production is currently forecast to grow from 33.1 million bpd in the fourth quarter of 2021 to 34.5 million bpd in the fourth quarter of 2022, but to decline by the end of 2023. Global oil demand is expected to remain strong, with global oil consumption rising by 3.6 million barrels per day in 2022 to reach 102.3 million barrels per day in 2023, but oil production will grow at a faster rate. EIA Acting Administrator Steve Nalley said in a statement that inventories are expected to begin to replenish as crude production increases and pull down prices for gasoline, jet fuel and other petroleum products in the near term.