U.S. Offshore Only Real Source of Oil Production Growth, OPEC Finds

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Any future growth in oil production in the U.S. is expected to come largely from offshore, economists at the Organization of the Petroleum Exporting Countries (OPEC) reported on Thursday.

Supported by its vast shale oil deposits, the U.S. is the world leader in crude oil production, besting Saudi Arabia by about 4 million barrels per day (BBL/d). Shale oil production, led by output from the Permian Basin in Texas and New Mexico, accounts for about 70% of total U.S. crude oil production.

OPEC economists wrote in their monthly market report for September that shale activity was somewhat suppressed, however. Production in Texas increased by 11,000 BBL/d from August to average 5.7 million BBL/d. That, however, is 33,000 BBL/d less than during the same period last year.

In North Dakota, OPEC found Bakken Shale oil production increased by 18,000 BBL/d from August levels to reach 1.1 million BBL/d, compared with an 85,000 BBL/d increase during the same period last year.

OPEC economists said that any meaningful month-on-month increase in U.S. crude oil production would come from the Gulf of Mexico. Offshore production increased 67,000 BBL/d, higher than year-ago levels to clock in at about 1.9 million BBL/d.

"Oil production in the Gulf of Mexico is currently at its highest level since November 2023, and further support is expected from project ramp-ups in the coming months, although the risk of hurricanes has not been eliminated," the economists wrote.

Despite forecasts for a busier-than-expected hurricane season, it's been rather mild so far with only a few named storms brushing the U.S. East Coast. Atmospheric conditions are offsetting some of the warmth seen in sea-surface temperatures so far this year, limiting the potential for significant storm formation in the Atlantic.

Subscribers to Industrial Info's Breaking Energy News (BEN) service can read a detailed outlook on hurricane activity here.

Substantial U.S. offshore production came from the Mad Dog prospect, among the largest oil-bearing reserves in the region. BP plc (London, England) in August started work at an extension project said to add 20,000 barrels of oil equivalent per day in production from a facility that already can turn out about 140,000 BBL/d.

Subscribers can click here to read the detailed project report.

By next year, U.S. crude oil production is on pace to decline by about 35,000 BBL/d as producers curtail drilling activity, OPEC economists reported.

U.S. crude oil prices at about $63 per barrel are close to the breaking point for shale drillers, as surveys from the Federal Reserve Bank of Dallas found upstream players need oil at about $60 to increase output.

Geopolitical headwinds could complicate future growth given increased tensions in the Middle East. Demand, meanwhile, may be swelling in the Asian economies, though OPEC economists said much of the tension associated with U.S. President Donald Trump's trade policies is easing.

"Our forecast assumes that reasonable trade agreements will be maintained with most key U.S. trading partners, allowing global economic uncertainty to ease further," the economists wrote.

On Thursday, however, the U.S. government reported that consumer-level inflation came in slightly higher than expected. U.S. crude oil prices were down about 2% on the day.

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