US EIA projects oil, gas production growth in 2025 amid stalling rigs

US exploration and production companies kept drilling activity flat in January, according to the US Energy Information Administration, a cadence that is generally expected to continue in the months ahead before rig counts set off on a decline as oil producers face down lackluster crude prices and natural gas-weighted operators await a sustained call for additional supply.

Across the five largest Lower 48 unconventional plays, rigs counts in January stayed within one to two units of their December 2024 totals, with Appalachian rigs remaining unchanged on the month at 34, EIA's latest Drilling Productivity Report released Feb. 11 showed.

In the Permian Basin, which accounts for nearly three-quarters of the Lower 48 rigs in EIA's tally, producers operated 303 rigs in January. The Eagle Ford Shale fell two to 49, while Appalachia and the Haynesville Shale at 31 rigs remained at multi-year lows.

Crude, gas outlook

A number of analysts and industry players were projecting flat to declining rig activity in 2025 considering where crude futures have been.

"With most budgets set in late 2024 at $70/barrel WTI, operators will maintain rig counts near those in late 2024," S&P Global Commodity Insights' upstream analysts said in a Feb. 10 oil supply outlook. "However, oil-directed drilling activity will decline in the second half of 2025 as lower oil prices, particularly for 2026, begin to materialize in the forward curve."

Among the E&Ps reporting capital budgets so far, Chevron intends to cut spending in the Permian, planning to grow production there in 2025 but at a slower pace. During a Jan. 31 earnings call, CEO Mike Wirth said year-on-year growth in the Permian likely moderates from 18% in 2023 to 9%-10% in 2025 and "something a bit less than that" in 2026.

Executives at Appalachian gas producer CNX Resources said the company plans to boost the number of wells it turns to sales in 2025 to maintain roughly flat production, but that the gas market is not ready for meaningful supply growth just yet.

"We need to wait and see kind of where the industry production levels are coming out of winter," as well as where US gas storage levels end up at the end of the season, Chief Financial Officer Alan Shepard told analysts during CNX's quarterly call.

Some Haynesville operators communicated a similar message earlier in the year.

Production

US oil and gas production are forecast to grow despite the more conservative capital plans as operators continued to stack up and tout efficiency gains. In the first quarter, the EIA projects dry gas production of 103.7 Bcf/d on average, and volumes are expected to rise over consecutive quarters to nearly 106 Bcf/d on average in the fourth quarter of 2024, according to the agency's Short-Term Energy Outlook updated on Feb. 11.

The projections would align with the incremental increase in LNG feedgas demand expected throughout 2025, a function of ramping up production at Venture Global's Plaquemines LNG and Cheniere Energy's Corpus Christi Stage 3 export project. Total LNG feedgas is expected to rise 21% in 2025 compared with 2024's average 13.2 Bcf/d, according to Commodity Insights forecasts.

The EIA noted risks in the year ahead to gas market fundamentals such as winter weather, as well as the timing and volume of LNG production from new facilities. As for tariffs, the agency said it expects that China's retributive tariffs on US LNG would have a limited effect on exports.

"With ample demand for LNG globally, we expect that any LNG not purchased by China would be imported elsewhere," the EIA said in its outlook.

With regard to oil, the EIA said President Donald Trump's tariff actions are among the factors contributing to significant uncertainty about its price forecasts, which project WTI at $70.65/b for the year.

"Although the future imposition of tariffs could affect oil trade routes, we do not presently anticipate the tariffs put forward in the February 1 executive order would significantly affect global oil supply," the EIA's outlook said. "Still, the possibility of future tariffs and the new sanctions on Russia are sources of uncertainty for oil prices going forward."

Lower 48 onshore crude production is forecast to grow from 11.15 million b/d in the first quarter to 11.5 million b/d on average during the fourth quarter of 2025, led by the Permian. EIA expects oil production in the basin to increase 6% to 6.78 million b/d over the same period.