2020 Forecast - U.S. oil and gas production

Despite a reduction of drilling activity in the shale plays, U.S. oil production hit an all-time high of 12.87 MMbpd in December. This rise in U.S. output is due largely to a decision by Saudi Arabia to curb its production during 2019 by 1.11 MMbopd, to support benchmark prices.

Crude oil. U.S. oil production increased 11.4% in 2019, with noticeable growth reported in Texas, New Mexico, North Dakota, Colorado and Oklahoma. WTI started 2019 at $51.38, before topping out at $63.86/bbl in April. Prices remained relatively stable throughout the remainder of the year in spite of escalating geopolitical tensions in the Middle East and the ongoing trade dispute between China and the U.S.

Of the 10 largest oil-producing states (>100,000 bopd), gainers outnumbered losers, with operators in eight states upping overall production, and just two states suffering losses. Texas oil production climbed 14.2%, increasing to a daily average of 5.43 MMbpd in 2019, despite slumping activity in the Permian and Eagle Ford plays. On the New Mexico side of the Permian, production increased 36%, up to 923,600 bopd, the largest percentage gain of any of the big-10 states. Bakken production in North Dakota registered an 11.4% increase, up to 1.41 MMbopd.

In the Western states, Colorado enjoyed a 5.7% increase to 514,800 bopd, while Wyoming was up 16%, to 278,300 bopd. In California, a catastrophic reduction in drilling activity that started in 2015, has had little effect on output as the state’s production remained resilient at 457,200 bopd, a loss of just 4%.

In the Mid-continent, production in Oklahoma shot up 6.1%, despite disappointing results in the SCOOP and STACK plays. Shale-poor Kansas dropped 4.5%, to average 90,900 bopd, while Louisiana and the federal offshore increased 6.4%, up to 1.64 MMbopd. Alaska was not as fortunate, dropping 2.8% to average 466,100 bopd.

Natural gas. Henry Hub gas prices averaged $2.57/MMBtu in 2019, down $0.58/MMBtu from 2018. HH prices hit a high of $3.11/MMBtu in January, but retreated 18.4% during the year to average $2.22/MMBtu in December. The large price drop is due to surging output from shale plays that overwhelmed demand and export capabilities.

Marketed gas production climbedsteadily throughout 2019, increasing to 103,683 Bcfd in December, a y-o-y gain of 8.8%. The increase is likely attributed to a ramp-up of LNG exports. The EIA forecasts that HH spot prices will average $2.33/MMBtu in 2020 and $2.54/MMBtu in 2021. The EIA expects U.S. net gas exports to double by 2021 and forecasts that exports will exceed gas imports by an average 7.3 Bcfd in 2020.