Crude oil production in the Permian Basin, the country’s largest oil field, is slated to move beyond its pre-pandemic high next month, according to the most recent U.S. Energy Information Administration (EIA) Drilling Productivity Report.
Because of a myriad of contributing factors during the height of the COVID-19 pandemic in 2020, demand for crude oil and petroleum products declined rapidly, inventories increased, and prices fell.
Now the pendulum has swung the other way and demand for petroleum has grown faster than supply, reducing inventories and contributing to higher prices for crude oil and petroleum products.
Additionally, with the recent comeback of many U.S. refineries from pre-pandemic levels as well, there has been an increase in demand for crude oil used as a feedstock to produce petroleum products.
The Permian Basin, located in Texas and New Mexico, appears to be holding its own. The EIA forecasts the Permian to reach an oil output record of 4.953 million barrels per day in December, with much of the production coming from new wells.
Overall shale production across seven major shale regions is forecast to rise by 85,000 bpd to 8.316 million bpd, with the bulk of the increase seen in the Permian, the report disclosed.
Last week, Bloomberg reported that crude supplies from the basin now exceed that of each OPEC member except Saudi Arabia. "Its [Permian] bounceback has been driven by low break-even costs, and the largest U.S. drillers are almost exclusively focusing their limited domestic plans for expansion on the sprawling oil patch, at the expense of other shale basins," reports Bloomberg, adding that total U.S. output is still a long way off from a full recovery.
"We've come through a period of market dislocation, and the industry has been remarkably resilient," said Dr. Dean Foreman, chief economist for the American Petroleum Institute.
Foreman said if we restrict energy in the U.S. – as the [Biden] administration threatens to do by pausing new oil and natural gas leasing on federal lands and waters – it can have a detrimental impact on the consumer and fails to recognize the fact that oil and gas will supply needed energy for decades to come.
"The Obama administration knew the U.S. needed an all-of-the-above energy strategy, and we still do today," said Foreman. "There’s little doubt that the Biden Administration is acting purposefully to shift consumers away from fossil fuels, but it doesn’t have a plan to ensure consumers can afford it. The White House pleading with OPEC to come to the rescue didn’t make sense, not even to OPEC. It’s an import-more-oil strategy that could seriously harm U.S. energy security and push American jobs overseas."
"Let’s recognize and embrace the need for responsible U.S. development and its essentiality to an energy transition that’s compatible with U.S. economic, energy security and national interests," said Foreman.
