As oil and gas companies gear up to release first-quarter 2018 earnings results and give insight on future development and production plans, the U.S. Energy Information Administration (EIA) says crude oil production in the U.S. could be heading toward another record.
This would follow record-breaking growth in 2017.
The EIA on April 4 said U.S. oil production ticked up by 5% in 2017 to 9.3 million barrels per day (MMbbl/d), led by production in Texas. At an average 3.5 MMbbl/d, crude oil production from the Lone Star State, home of the prolific Permian Basin that partially lies in New Mexico, was more than two and a half times the amount of crude oil produced in the U.S.
U.S. crude oil production, with output from tight rock formations comprising the bulk, is expected to continue on this growth trend in 2018. The EIA has said that crude oil production could hit an average 10.7 MMbbl/d in 2018 and rise even further in 2019 to 11.3 MMbbl/d.
“U.S. crude oil production has increased significantly over the past 10 years, driven mainly by production from tight rock formations using horizontal drilling and hydraulic fracturing,” the EIA said.
Last year was also marked by notable production growth in New Mexico, which leaped over California and Alaska to claim the position of the nation’s third-largest crude oil-producing state. Colorado, Oklahoma and North Dakota also each saw gains of more than 30,000 bbl/d of oil production over 2016 levels, the EIA reported.
But the oil production increase was not just evident onshore. A slate of new projects and expansions coming online offshore in 2017 helped to push oil production from federal Gulf of Mexico waters higher. “The federal Gulf of Mexico was the second-largest producing region in 2017,” contributing 51,000 bbl/d of annual growth—the region’s highest annual average crude oil production, the EIA said.
U.S. crude oil production growth continues a trend that started following a production decline in 2016. At that time the market downturn had sent the price for a barrel of West Texas Intermediate crude down to an average $43.29, according to EIA data.
However, since then oil prices have risen steadily with West Texas Intermediate averaging about $62.23 per barrel in February, further incentivizing E&Ps to pump more to increase profit potential as global demand inches up.
In March the International Energy Agency (IEA) projected global oil demand to increase by 1.5 MMbbl/d to 99.3 MMbbl/d in 2018. “Strong growth in the U.S. is expected to boost this year’s non-OPEC expansion” to 1.8 MMbbl/d compared to 760 Mbbl/d in 2017, the IEA said in its March 2018 Oil Market Report.
Just last week U.S. crude production hit a new weekly record when 10.46 MMbbl/d of crude oil was produced.
In time, the world will see whether crude oil production in the U.S. surges as expected.
ExxonMobil Corp. and Chevron Corp., two of the biggest oil players in the U.S., could shed some more light on the direction of production when they release information on their first-quarter 2018 earnings. Both companies are scheduled to hold calls with analysts April 27. Another big player, ConocoPhillips, will host an earnings conference call April 26.
ExxonMobil has already said it is planning a fivefold increase in Permian tight-oil production through 2025 as part of its plan to drive growth from its next-generation assets. Aided by acquisitions, the company has increased the size of its Permian resource from less than 3 billion barrels of oil equivalents (Bboe) to 9.5 Bboe.
“We are in a solid position to maximize the value of the increased Permian production as it moves from the wellhead to our Gulf Coast refining and chemical operations, where we are focusing on manufacturing higher-demand, higher-value products,” ExxonMobil CEO Darren Woods said in March.
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