Saudi Arabia and Russia's worst nightmares have just worsened: the US is now projected to become an even bigger producer and exporter of oil and gas over the next two years.
The OPEC+ group, led by the Saudis, recently abandoned their production cuts of 2.2 million barrels a day as global oil prices failed to rise. Weakening demand and increased production from non-OPEC sources, including small OPEC member countries, forced the Saudis to cut February sales prices to Asia by $2 per barrel, the largest cut in over two years.
Record production levels in the US, with over 5 million barrels a day in exports in late 2023, contributed to the sluggish oil market, particularly after the post-invasion rush in Gaza.
Now, the US Energy Information Administration (EIA) forecasts record US oil production in 2024 and even higher numbers in the following year.
In its first Short-Term Energy Outlook for 2024, the agency predicts US crude production will reach a record 13.21 million barrels per day (bpd) in 2024, rising to 13.4 million bpd in 2025. This projection represents a growth of 290,000 bpd this year, higher than the previous estimate of 180,000 bpd.
The EIA notes that the decrease in active oil rig numbers over the past year has slowed US production growth. Nevertheless, it expects production to continue increasing due to improved well efficiency.
While global oil and gas production is expected to rise by 0.6 million bpd in 2024 (down from 1.7 million bpd in 2023), the EIA anticipates a demand increase of 1.4 million bpd this year and 1.2 million bpd next year.
The EIA predicts that OPEC+ production cuts will lead to global oil inventory withdrawals in the first quarter of 2024. However, inventory is expected to build up in the latter part of 2024 as slowing demand growth is surpassed by rising supply growth.
Notably, the EIA foresees an increase in output from Guyana, from 400,000 to 700,000 barrels a day by the end of 2025, making it a significant new source of oil.
Furthermore, US natural gas production, demand, and liquefied natural gas (LNG) exports are expected to reach record highs in 2024. Dry gas production is projected to rise to 105.04 billion cubic feet per day (bcfd) in 2024 and 106.38 bcfd in 2025. Domestic gas consumption is forecasted to increase from 88.90 bcfd in 2023 to 89.89 bcfd in 2024 before easing to 89.66 bcfd in 2025.
US LNG exports are estimated to reach 12.36 bcfd in 2024 and 14.43 bcfd in 2025, up from 2023's record of 11.84 bcfd.
On the other hand, coal production and use are declining, with the EIA projecting a decrease in US coal production to the lowest levels since the 1960s. Solar energy is emerging as a significant growth source, with the EIA forecasting an increase in solar generation share to 7.0% by 2025.
In summary, the US is set to become a dominant player in oil and gas production, causing challenges for traditional oil-producing nations like Saudi Arabia and Russia while solar energy continues to grow as a key energy source.
