U.S. crude oil production forecast to reach record highs

In our January 2023 Short-Term Energy Outlook, we forecast that crude oil production in the United States will average 12.4 million barrels per day (b/d) in 2023 and 12.8 million b/d in 2024. Our forecast U.S. crude oil production in both 2023 and 2024 would surpass the previous annual record high of 12.3 million b/d set in 2019 (Figure 1). The growth in crude oil production is driven by increased production in the Lower 48 states, notably the Permian region and, to a lesser extent, the Federal Offshore Gulf of Mexico (GOM). Increased forecast production is supported by crude oil prices and infrastructure capacity additions.

We forecast that crude oil production in the United States will increase by 540,000 b/d in 2023, averaging 12.4 million b/d for the year. In 2024, we forecast that U.S. crude oil production will increase by 400,000 b/d to average 12.8 million b/d.

Crude oil production growth in the United States is driven by increased production in the Permian region (Figure 2). We forecast that crude oil production in the Permian region will increase by 470,000 b/d in 2023 to average 5.7 million b/d. Rising crude oil production in the Permian region is partially the result of the expected completion of new natural gas pipelines. These pipelines will increase producers’ ability to transport the natural gas that is produced along with crude oil (associated natural gas) to market, which removes a potential constraint on crude oil production. Some of this natural gas is currently being flared. We forecast that crude oil production in the GOM will increase by 120,000 b/d in 2023, and that production growth in other regions of the United States (excluding GOM and Permian region) will remain essentially flat in 2023.

In 2024, we forecast that crude oil production growth in the United States will again be driven by increased production in the Permian region, which we expect will increase by 350,000 b/d. We expect crude oil production growth in the GOM will be essentially flat in 2024 while production in other U.S. regions (excluding GOM and Permian region) will increase by 70,000 b/d.

We forecast the West Texas Intermediate (WTI) crude oil price will average $77 per barrel (b) in 2023 and $72/b in 2024, down from $95/b in 2022 (Figure 3). Despite declining crude oil prices, we expect the WTI price will be high enough to support crude oil production growth, especially in the Permian region, where recent data from the quarterly Dallas Fed Energy Survey indicate that average breakeven prices range from $50/b to $54/b.

Data from the quarterly Dallas Fed Energy Survey suggest increasing activity overall among exploration and production (E&P) companies, supporting our forecast for growth in U.S. crude oil production. The survey covers companies located or headquartered in Texas, southern New Mexico, and northern Louisiana. Each index represents the percentage of companies reporting an increase in an indicator minus the percentage reporting a decrease.

According to the fourth-quarter 2022 Dallas Fed Energy Survey of 97 E&P companies, business activity continues to expand, and most companies expect capital expenditures will increase in 2023. The business activity index—the broadest measure of conditions facing E&P companies—had been 29.9 in the fourth quarter of 2022, marking the ninth consecutive quarter above the five-year (2017–2021) average and suggesting increasing activity (Figure 4). Similarly, 64% of respondents expected their capital expenditure spending to increase in 2023 compared with 2022. Although 55% reported increased finding and development costs in the fourth quarter, a noticeable slowdown in companies reporting cost increases since the second quarter of 2022 has begun. We anticipate capital expenditure growth in 2023 will be enough to cover increased costs and support production growth.

A broader sample of oil and natural gas firms surveyed by the Dallas Fed found companies used a WTI average price of $73/b for planning their capital expenditures in 2023. This price is higher than those used in 2021 ($44/b) and 2022 ($64/b). In addition, the oil and natural gas firms expected WTI crude oil prices to average $84/b by the end of 2023, an increase from the $76/b December 2022 average.

For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.