EIA: US oil output to touch a record high in 2024

U.S. crude production will hit records over the next two years but grow at a slower rate, the U.S. Energy Information Administration (EIA) said, as efficiency gains offset a decline in rig activity.

The rise in U.S. output comes as the Organization of the Petroleum Exporting Countries and its allies are cutting their own output in a bid to boost oil prices.

U.S. crude production will rise by 290,000 barrels per day (bpd) to a record 13.21 million bpd this year, the EIA said in its Short-Term Energy Outlook (STEO).

The EIA forecast OPEC+ production, excluding Angola which left the bloc in January, would fall by 620,000 barrels per day to 36.44 million barrels per day next year. That was down from a five-year average of 40.2 million bpd before the Covid-19 pandemic.

A Reuters survey on Friday found that oil output by the members of the Organization of the Petroleum Exporting Countries (OPEC) rose in December as increases in Angola, Iraq and Nigeria offset continuing cuts by Saudi Arabia and others in the wider OPEC+ alliance.

Worries of rising supply and weak demand for light crude also pushed Saudi Arabia to cut the February official selling price (OSP) of its flagship Arab Light crude to Asia to the lowest level in 27 months.

While U.S production is set to climb to new records in 2024 and 2025 due to well efficiencies, the growth is set to slow from the 1 million bpd growth in 2023 due to lower drilling activity.

Prices for global benchmark Brent crude is expected to average $82 per barrel in 2024 and $79 in 2025, close to the 2023 average of $82, EIA said.

"Although we expect OPEC+ to restrict production to prevent prices from falling, we still anticipate global production to exceed consumption by mid-2025 and therefore for petroleum inventories to increase," the agency wrote in its report.

EIA cautioned that heightened tensions in the Middle East and attacks on ships in the Red Sea could disrupt trade flows and push up prices.

Oil prices climbed over 2% on Tuesday as the Middle East crisis and a Libyan supply outage pared the previous day's heavy losses. Brent crude futures were trading around $77.91 a barrel, while U.S. West Texas Intermediate futures were trading at $72.72 a barrel.

On the demand side, the agency expects growth in global liquid fuels consumption to be 1.4 million bpd in 2024 and 1.2 million in 2025, lower than the 1.9 million bpd growth in 2023 due to a weaker Chinese economy, increasing vehicle fleet efficiency, and an end to pandemic recovery-related growth in 2023.