The US again lowered its forecast for oil production for next year

On Tuesday, the Energy Information Administration (EIA) released its monthly report, which now expects production to reach 12.31 million barrels a day in 2023. This forecast is the fifth consecutive downward reassessment. The previous forecast assumed that production would be able to beat the record result of 2019, when production reached the level of 12.315 million barrels per day.

According to the forecast, despite the fact that oil prices are near the $90 per barrel mark, exceeding almost twice the breakeven costs of most domestic producers, it can be noted the slowdown in shale oil production in the United States. If the current trend continues, the global market will remain without additional barrels needed to compensate for the reduction in OPEC+ production and the resulting Russian oil supply disruptions.

The Energy Information Administration estimates that production this year will average 11.83 million barrels per day. Although this is the first increase in the forecast since June, it suggests that domestic production is still nearly 10% below the level seen in February 2020, a month before the COVID-19 pandemic caused a sharp drop in demand and global production cuts.

According to producers in the US, rising costs are one of the main reasons for the slow growth in oil production. The heads of oil companies have warned about the consequences of restrictions in supply chains. According to Ryan Lance, the chief executive officer of ConocoPhillips, limited access to labor and equipment is driving the pace of industry growth right now.

In addition, manufacturers are under pressure from a sharp rise in prices for equipment for oil fields. Since July, the number of drilling rigs for crude oil production in the United States has been growing more slowly, while the stock of drilled-but-uncompleted wells, which increased markedly at the height of the pandemic, are currently mostly exhausted.

However, the most important factor in the slowdown in growth is the desire of companies to increase their profits rather than their production, a significant difference from the previous ten years, when companies sought to increase production at all costs.

As Ezra Jacob, CEO of EOG Resources Inc. noted last week, most of these enterprises are drilling and investing their funds more discreetly than it was before the pandemic.

Shares of American companies in the oil and gas sector are trading at record highs, billions of dollars are spent by companies on share buybacks and dividends, so the new business model is convenient for shareholders. Nevertheless, the White House has repeatedly called on the industry to increase production, which causes tension in relations.