The US' crude oil production is expected to decline in 2020 and 2021 due to coronavirus-related low oil demand around the world and falling crude prices, according to a statement by the country's Energy Information Administration (EIA).
The EIA said Thursday that its estimates crude oil production in US to average 11.7 million barrels per day (bpd) in 2020 and 10.9 million bpd in 2021.
These levels, if realized, would be down 0.5 million bpd and 1.3 million bpd, respectively, compared to the US' average crude oil production of 12.2 million bpd in 2019.
In addition, the EIA said its forecast of 0.8 million bpd year-over-year output fall in 2021 would be the largest annual decline in US crude oil production on record.
Spot price of American benchmark West Texas Intermediate (WTI) crude oil decreased from $58 dollars per barrel in January 2020 to $29 per barrel in March and $17 per barrel in April, the EIA said.
"This sharp decline in the oil price is already having a significant effect on drilling activity in the US. The number of active drilling rigs in the Lower 48 states, excluding the Federal Offshore Gulf of Mexico (GOM), totaled 753 as of February, but it fell to 738 in March and 572 in April, the lowest since May 2016," it added.
The number of oil rigs in US, an indicator of short-term production in the country, fell for nine consecutive weeks to hit 258 for the week ending May 15 -- its lowest level since July 2009, according to oilfield services company Baker Hughes data.
The EIA said its short-term forecast for crude oil production is separated into three regions in US as the Lower 48 states, which had 81% of crude oil production in 2019, the GOM with 15%, and Alaska with 4%.
"Most of the expected changes in US crude oil production arise in changes in Lower 48 states excluding GOM production because projects in the GOM and Alaska tend to have different development timelines and are less sensitive to near-term price changes," the statement said.
In general, any major change in oil prices causes a significant impact on crude production after around six months.
"However, current market conditions will likely not follow this relationship as many producers have already announced significant reductions in capital spending and drilling levels, as well as plans to curtail production," the statement said.
"Much of the recent changes in the WTI price will continue to affect production later this year and throughout 2021," it added.
By Ovunc Kutlu