Global crude production growth seen in 2023, 2024 as US, others offset OPEC cuts: EIA

Expected higher oil prices spurred by Saudi Arabia's extended voluntary production cuts are creating incentives for non-OPEC producers to ramp up their output, allowing for growth in global oil production to continue in 2023 and 2024, the US Energy Information Administration said Aug. 8.

Leading the pack in production will be the US, which is forecast to surpass 12.9 million b/d of monthly crude production for the first time in late 2023, the EIA said in its August Short-Term Energy Outlook.

The agency pushed up its 2023 outlook for US oil production by 200,000 b/d to 12.76 million b/d and expects output growth to continue into 2024 to put US crude production at 13.09 million b/d, a 240,000 b/d bump up from last month's estimate.

Both would be annual records for domestic oil production, which EIA Administrator Joe DeCarolis said was "bolstered by higher oil prices and higher well productivity in the near term."

Production growth is expected to decline in the US as growth in well-level productivity slows, but rising oil prices are expected to support increased oil-directed rig activity in 2024, the EIA said. It forecasts US oil output to pick up in the second half of 2024 to approach 13.4 million b/d by the end of that year.

Increases from Brazil, others

Other non-OPEC producers with strong forecast production growth include Brazil as it increases output from floating production, storage and offloading vessels, as well as Canada, Guyana and Norway.

Combined, non-OPEC producers are expected to increase production by 2.1 million b/d in 2023 and 1.2 million b/d in 2024. This is seen offsetting output declines from the OPEC+ alliance, and the EIA projected global oil production to increase by 1.4 million b/d in 2023 and by 1.7 million b/d in 2024.

Earlier this month, Saudi Arabia extended its voluntary 1 million b/d oil production cut to September on top of some 1.2 million b/d in collective OPEC+ voluntary output reductions that have been in force since May. And Russia said it would cut its oil exports by 300,000 b/d in September, following a 500,000 b/d export cut in August.

"Despite production cuts that extend through 2024, OPEC crude oil production will likely increase in 2024 by an average of 0.6 million b/d," the EIA said. "Higher production targets for the United Arab Emirates in 2024 and increasing production from Iran and Venezuela will drive this increase."

Inventory draws

The agency nudged up its global oil demand outlook by 30,000 b/d for 2023 to 101.19 million b/d while keeping its 2024 estimate unchanged at 102.8 million b/d.

The EIA expects that increasing demand, combined with the OPEC production cuts, to prompt a transition from global oil inventory builds to inventory draws during the latter half of this year, supporting global oil prices.

Reflecting its expectations of tightening balances in global oil markets, the EIA increased its 2023 forecast for Brent crude by $3.28 to $82.62/b and its 2024 outlook by $2.97 to $86.48.

The agency sees Brent prices rising to around $88/b at the end of the year and remaining at that level through the first quarter of 2024 before easing in the second quarter "as supply growth leads to some rebuilding of global oil inventories later in 2024."

Similarly, the agency forecast WTI crude would average $77.79/b in 2023, up $3.36 from last month's estimate for the year, while it raised by $2.97 its expectation for 2024 to $81.48/b.

Prices at the pump

Retail gasoline prices are expected to average $3.56/gal this year, up 16 cents from the previous estimate. The EIA sees gasoline prices declining to an average of $3.45/gal in 2024, an 11-cent increase from last month's estimate.

The uptick in the EIA's forecast gasoline prices was triggered by a series of unplanned refinery outages this summer, including a reformer outage at Marathon's Galveston Bay refinery and fluid catalytic cracking unit outages occurred at Phillips 66's Bayway refinery and ExxonMobil's Baton Rouge refinery.

"Many of the outages affected secondary conversion units, reducing the relative yields of gasoline from those facilities," the EIA said. "Lower gasoline production and lower net imports of gasoline contribute to lower total gasoline inventories in our forecast, which we now expect to remain near the five-year (2018-2022) low through the end of our forecast."

The agency also raised its expectations for retail diesel prices, putting the fuel at $4.17/gal this year, up 21 cents from the prior estimate, and at $3.94/gal in 2024, a 10-cent increase from July's estimate.