U.S. Oil Production Levels Off: What's Next?
U.S. oil and gas output is leveling off after a period of intense activity. As of March 2024, crude oil production hovered around 13.2 million barrels per day, according to the U.S. Energy Information Administration. This marked a slight increase of less than half a million barrels per day from the previous year, indicating a slowdown from the rapid growth seen in the latter half of 2023.
The slowdown in oil production aligns with historical patterns, typically following a period of high prices which peaked in 2022. By early 2024, production began to stabilize, influenced also by weather disruptions at the end of 2023 that initially masked the signs of this leveling trend.
The natural gas sector has seen an even sharper halt in production growth. From March 2023 to March 2024, dry gas production remained almost unchanged—around 102.6 billion cubic feet per day—showing signs of peaking towards the end of 2023. With gas prices dropping sharply since mid-2022, the number of rigs drilling for gas decreased significantly. By May 2024, only about 101 rigs were active, down from 162 in September 2022.
This decline in active rigs is expected to keep oil production relatively flat through mid-2025 unless there's an unexpected price rebound. This stabilization in oil drilling is evident from the rig count, which dropped from a high of 623 in December 2022 to just 497 by May 2024. If oil prices remain steady, no significant increase in production levels is anticipated.
Looking forward, the industry expects a balanced market, aided by strong demand for gas in power generation this summer, a potentially colder winter, and increased LNG exports. These factors are likely to deplete surplus inventories by the end of the 2024/2025 winter season.
How Long Will U.S. Oil and Gas Last?
The U.S. is known for its highly efficient and clean energy production, making it counterproductive and contradictory to depend more on energy from foreign countries with adversarial relations.
Recent updates from the U.S. Energy Information Administration (EIA) reveal that as of the end of 2022, U.S. crude oil reserves have grown by 9% to 48.3 billion barrels. Meanwhile, natural gas reserves have also seen a significant increase, rising 10% from the previous year to a new record of 691.0 trillion cubic feet.
The United States sits atop a staggering reserve of oil and natural gas, according to a recent report from the Institute for Energy Research (IER):
Oil Reserves: The U.S. holds about 1.66 trillion barrels of technically recoverable oil.
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Current Usage: Enough to last 227 years at the current rate of consumption.
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Gasoline Production: This could fuel the transportation sector for 539 years if solely used for gasoline based on 2023 usage levels.
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Comparison: This is a 15% increase from the 2011 IER estimate and over 5.6 times the proved reserves of Saudi Arabia.
Natural Gas Reserves: The U.S. has approximately 4.03 quadrillion cubic feet of technically recoverable natural gas.
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Supply Longevity: At the current rate, there's enough natural gas for the next 130 years.
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Potential Increase: If just half of the in-place natural gas resources become recoverable, the U.S. could have over 1,000 years' supply at 2022 consumption rates.
U.S. Strategic Petroleum Reserve
Recently the U.S. government announced plans to buy 6 million barrels of crude oil for the Strategic Petroleum Reserve (SPR) as part of efforts to replenish it after last year's extensive drawdown. In 2022, President Joe Biden's administration released a historic 180 million barrels to stabilize oil prices. Since then, approximately 14 million barrels have been bought for restocking, with an additional 4 million barrels scheduled to return to the SPR by February, following their temporary loan to various oil companies.
This recent purchase includes 1.2 million barrels from Sunoco Partners Marketing & Terminals LP and about 900,000 barrels each from Macquarie Commodities Trading US LLC and Phillips 66. Additionally, the Energy Department has managed to cancel 140 million barrels of oil previously mandated by Congress to be sold from the SPR from this year through late 2026. This action is part of ongoing efforts to manage the nation's emergency oil reserves effectively.
