Higher oil prices will have limited effect on U.S. crude output, EIA projects

By Sheela Tobben on 7/7/2021

(Bloomberg) --The U.S. sees limited domestic oil production growth through next year despite rising oil prices and rebounding demand.

Oil companies will produce 20,000 barrels a day more than previously forecast for this year, at 11.1 million barrels, the Energy Information Administration said in a report Wednesday. Output next year was raised 60,000 barrels day to 11.9 million, making it the first upward revision since March. At the same time the agency boosted its price forecast for West Texas Intermediate by $4 a barrel to $65.85 for 2021.

The forecast for limited U.S. output growth comes as domestic supplies are falling at the fastest rate in decades and just days after OPEC+ negotiations failed, leaving the market uncertain about when to expect more supplies from the group.

U.S. shale producers haven’t significantly boosted production in recent months, favoring discipline and investor returns over supply growth. Weekly government oil production data so far has been a testament to that, with domestic output flat-lining at just above 11 million barrels a day, roughly 2 million barrels under its peak before the pandemic.

In addition to higher prices, the projections for more output through 2022 also stem from stronger actual production volumes in April than its model had originally predicted, the EIA said in an emailed statement.

Looking to 2022, the agency revised up its price forecast by $6.23 a barrel but still sees lower prices than this year at $62.97 as it expects incremental production growth from U.S. and OPEC+ to outpace consumption.

The EIA said that this forecast was completed on July 1, before OPEC+ ended its meeting without a resolution on Monday, but that it still expects OPEC+ to continue to increase production beyond July.

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