US crude oil production will fall next year as lower commodity prices cause a slowdown in drilling activity, the US Energy Information Administration said on Tuesday in its monthly Short-Term Energy Outlook report.
The forecast marks a major milestone as it would be the first annual decline in US oil production since COVID-19 pandemic-related slumps in 2020 and 2021, countering President Donald Trump's vow to unleash more domestic energy production.
There are mounting concerns that the nearly two-decade-old US shale revolution is near its end, especially as oil prices hover around multi-year lows due to the OPEC+ group's easing of its supply curbs and concerns about the global economy arising from Trump's erratic trade policies.
Crude output in the world's largest oil-producing nation will drop to about 13.37 million barrels per day in 2026, from around 13.42 million bpd this year, the EIA said. It previously expected US output to grow to 13.49 million bpd next year.
A decline in US output could help establish a floor under oil prices, said Rory Johnston, founder of the Commodity Context newsletter.
He cautioned, however, that a real rebound in the market will depend more on demand prospects than US supply.
The EIA lowered its total world oil consumption forecast for this year by about 200,000 bpd to 103.5 million bpd, citing softer consumption in developed nations.
Brent crude oil prices will average $65.97 a barrel this year in the spot market, and $59.24 a barrel next year, the agency said. US West Texas Intermediate crude oil will average $62.33 a barrel this year and $55.58 next year, it said.
Brent futures settled at $66.87 a barrel on Tuesday, while WTI settled at $64.98 a barrel.
Total world oil output will rise to 104.4 million bpd this year, the EIA said, up from its prior forecast of 104.1 million bpd. For next year, the agency expects world oil output to average 105.1 million bpd, down from its earlier forecast of 105.4 million bpd.-Reuters