The Energy Information Administration (EIA) lowered its U.S. crude production for both 2020 and 2021 to average 11.76 MMBbl/d and 11 MMBbl/d respectively.
In March, production had averaged 13 MMBbl/d. The forecast revision amounts to an annual decline of 9.5% in 2020 and 13% in 2021, according to the agency’s monthly Short-Term Energy Outlook (STEO) report.
Consistent with the forecast, many U.S. producers have announced large cuts to 2020 capital expenditures after WTI and Brent crude prices collapsed in March. Oil majors, who typically are more vertically integrated and better insulated from drops in price, have not been spared from the demand losses caused by the coronavirus. In its latest announcement, ExxonMobil said it would lower its 2020 capex budget by 30%, with much of the reduction coming from its Permian basin shale operations.
In the STEO, the EIA also said that its oil production forecast assumes that all oil stripper wells are shut in. Stripper wells are defined by the agency as wells that produce no more than 15 boe/d during a 12-month period. The EIA mentioned that its forecast does not include any potential proration of production that the Texas Railroad Commission (RRC) could impose on Texas producers. RRC plans to discuss such action during an April 14 virtual hearing.
There are already projected cuts of 2 MMBbl/d in U.S. production without intervention from the federal government, according to the EIA. “The private sector and the free market are driving those cuts,” the agency said in a separate statement.