United States Crude Oil Production Forecast 2022
The United States is the world’s third largest producer of crude oil, behind Saudi Arabia and Russia. Oil production in the United States has gradually declined since its peak in 1970. This decline was due to a variety of factors, including reduced access to oil reserves and increased competition from other countries. However, recent advances in technology have led to a resurgence in US production that is expected to surpass its previous peak by 2020.
The government said in a monthly forecast on Tuesday that U.S. crude oil production would increase by 720,000 barrels per day to 11.91 million bpd in 2022. According to the same Energy Information Administration monthly report, the U.S. crude oil production is expected to increase by 940,000 bpd to 12.85 million bpd in 2023. Total U.S. oil consumption is expected to increase from 730,000 bpd to 20.51 million bpd in 2022.
What is Crude Oil?
Petroleum, or crude oil, is a liquid composed of hydrocarbons, organic molecules and trace metals found on Earth. Although hydrocarbons are the most abundant component of crude oil, their proportions can vary from 50% to 97%, depending on the type of crude oil and how it is recovered.
Organic molecules such as nitrogen, oxygen and sulfur make up 6-10% of crude oil, while metals such as copper, nickel, vanadium and iron make up less than 1% of the total composition . We all use crude oil in one way or another, directly or indirectly.
Petrochemicals can be found in laptops and computers, medicines, recreational sports equipment, cosmetics, and even tea. Finally, crude oil is a necessity in our daily lives.
The formation of crude oil
Crude oil is produced by heating and compressing organic molecules over time. Most of the oil we collect today comes from prehistoric algae and zooplankton that sank in the ocean or at the bottom of lakes. This organic material eventually mixed with mud and was heated to high temperatures due to the pressure created by heavy layers of sediment. This process of diagenesis converts the chemical composition into a waxy molecule called kerogen and then into a liquid via catagenesis, which requires more heat.
world oil production
Although almost all countries use oil, not all countries produce it. The top five oil-producing countries are Saudi Arabia, Russia, the United States, Iran and China. Note that “production” refers to crude oil extracted from reserves. The top five oil consuming countries are the United States, China, Japan, Russia and Germany.
If consumption continues at its current rate, the world’s reserves will be depleted by 2039. Scientists and engineers are hard at work finding a way to obtain and refine crude oil more efficiently to avoid a global energy crisis.
Reference Article: Crude Oil Trading – A Beginner’s Guide
U.S. oil production expected to hit record high in 2023
Crude oil prices fluctuate seasonally due to supply and demand. The outbreak of COVID-19, which caused a drop in demand, has influenced crude prices recently. Despite the economic improvement, global uncertainties continue to influence oil prices. The U.S. Energy Information Administration (EIA) forecasts U.S. crude oil production to average 11.9 million barrels per day in 2020 and 12.8 million barrels per day in 2023, surpassing the previous high of 12.3 million barrels per day in 2019. Even though has risen, the EIA’s Short Term Energy Outlook (STEO) for May 2022 indicates that Brent crude oil prices will remain above $100 per barrel This year.
EIA Administrator Joe DeCarolis says our forecast is still uncertain, but we’ve always predicted that rising crude oil prices will contribute to record levels of annual U.S. oil production in 2023. But because the world’s oil supply is low and the demand for gasoline, diesel, and other petroleum products is still high, prices will change immediately if more oil is produced.
In addition, the EIA released its annual Summer Energy Industry Outlook, predicting that strong economic growth in the United States will increase electricity consumption by 0.4% this summer (June-August) compared to summer. 2021. According to the EIA, retail electricity sales to industrial will increase by 2.8%, while retail sales to the commercial sector will increase by 1.5%.
The EIA predicts that due to cooler temperatures, US consumers will use 2.9% less electricity this summer than last summer. As a result, the average US household will spend about the same amount on electricity this summer as it did last year due to rising electricity prices. Despite the increase in crude oil production, prices are expected to increase in the near future.
Five Factors Contributing to Current Oil Price Volatility
Previously, oil prices fluctuated seasonally. Instead, they soared in the spring as oil traders anticipated increased demand for summer vacation driving. After demand peaked in the fall and winter, prices fell. Geopolitical and civil unrest have a significant impact on global supply and prices.
There are a lot of things affecting oil prices right now, but here are the five most important.
1-The invasion of Ukraine by Russia
With Russia being the world’s third largest producer of liquid fuels and petroleum, its invasion of Ukraine in late February 2022 had an immediate impact on crude oil futures prices. As a result, crude oil prices rose as the war progressed, reaching around $100 a barrel.
2-United States oil supply
Natural disasters and the coronavirus outbreak continue to impact oil demand and supply. For example, the United States experienced a drop in production following Hurricane Ida in September 2021, which shut down at least nine refineries.
According to the EIA, crude oil production in the United States will average 12.01 million barrels per day in 2022 and 12.95 million barrels per day in 2023, according to the EIA.
3 – OPEC production cuts
Oil price increases are also caused by supply constraints imposed by the Organization of the Petroleum Exporting Countries (OPEC) and its partner countries. OPEC cut oil production in 2020 due to lower demand during the outbreak and gradually increased oil production in 2021 and 2022.
At the end of 2021, supply chain issues hampered global trade. OPEC said in December 2021 that it would continue to slowly increase oil production by 0.4 million barrels per day (mb/d) from January 2022.
4-Natural gas (NG)
Historically, Asia relied on coal to generate electricity, but recent shortages have forced it to switch to natural gas. For this reason, higher temperatures in Asia and Europe have led to increased demand for natural gas to generate electricity.
COVID-19 has impacted natural gas production in Europe, and a colder-than-expected heating season in early 2021 has further limited supplies. As a result, natural gas prices will skyrocket in 2021 and 2022, forcing affected countries to switch from gas to oil to save money on power generation.
5-Make a global inventory
Countries are forced to draw on their stored reserves as global oil production declines (not counting strategic oil reserves). As supplies run out, the constant demand for oil drives prices up.
OPEC cuts its 2022 oil demand growth forecast by 480,000 bpd:
OPEC cut its 2022 oil demand growth forecast by around 500,000 barrels per day (bpd), citing weaker-than-expected global economic growth and the reintroduction of COVID lockdowns in China. According to the cartel’s closely watched Monthly Oil Market Report (MOMR), global oil demand growth this year will be 3.67 million barrels per day (bpd), up from 4.15 million bpd last month. Indeed, OPEC has revised its economic growth forecasts downwards.
Total oil consumption is expected to average 100.5 million barrels per day in 2022, up from 100.91 million barrels per day in March. To be sure, OPEC’s forecast for global oil demand growth “remains under review,” as it did in March, until “more clarity emerges.”
OPEC+, the main coalition member, invaded Ukraine in late February, prompting OPEC to issue its first report since then. Changes in global economic growth and oil demand growth in the April survey, according to the report, were caused by “recent geopolitical tensions in Eastern Europe” and “the surge in inflation in the world”.
In a previous assessment, OPEC cut its forecast for global economic growth in 2022 from 4.2% to 3.9%. The cartel noted that this included the impact of the conflict in Eastern Europe and the lingering consequences of the pandemic, with risks weighing heavily on the downside.
As a result, estimated oil demand growth has been reduced by 480,000 bpd to “account for global GDP losses due to geopolitical developments and the return of the Omicron Variation in global oil demand in China.”
According to OPEC estimates, global oil consumption increased by more than 5 million barrels per day in the first quarter of 2022 as most countries eased COVID-related restrictions. However, due to recent political changes in Eastern Europe, the cartel expects year-on-year growth of 3.5mb/d in the second and third quarters of 2022.
That’s all there is to the crude oil production forecast; stay tuned to FXLeaders for forex trading signals and trading ideas. Have a good day!