America's oil production boom is expected to continue for the next 18 months, as projected by Goldman Sachs. Analysts anticipate that oil production in the Permian Basin will remain robust through the end of 2026, despite a slight slowdown from the rapid pace seen in 2023. In 2021, the US set a record by producing 12.9 million barrels of crude oil per day, surpassing all previous production levels in history, according to data from the US Energy Information Administration.
Goldman Sachs forecasts that while oil production will continue to grow, the pace will be more moderate in the upcoming years. The bank predicts that the US will produce 340,000 barrels of crude oil per day in 2024 and a still significant 270,000 barrels per day in 2026. This growth will be supported by enhanced drilling efficiency and sustained high oil prices. The Permian Basin's drilling activity is particularly responsive to price fluctuations, and with West Texas Intermediate crude prices expected to remain above $50 per barrel for the next 18 months, production is likely to stay strong.
Yulia Grigsby, an energy economist at Goldman Sachs Research, highlighted that drilling and completion efficiency continue to improve due to lower costs and shorter drilling times. However, the aging of oil wells in the Permian Basin is a factor contributing to the anticipated production slowdown. On average, oil rigs in the region start to plateau after three to four years of operation.
The number of active oil rigs in the Permian Basin has decreased by 30% compared to the average levels seen in 2018 and 2019, and this trend is expected to persist until the end of 2026. While well production may reach 100 barrels per day in 2024, it is projected to decline to around 50 barrels per day starting in 2025, representing a significant drop from the growth rates observed in 2019.
Researchers attribute the slowing production to the impact of years of intensive exploration and production on the rock quality of the basin, leading to geological deformations that hinder further productivity improvements in oil wells. The recent rise in oil prices can be attributed to supply cuts from OPEC+ and escalating geopolitical tensions in the Middle East. Despite the projected increase in oil demand over the next decade, there are concerns about a potential supply shortage in the market.
Conversely, the International Energy Agency has suggested that oil demand is likely to peak before 2030, presenting a different perspective on the future of the oil market.
