EIA Sees U.S. Oil Production in Decline

---

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--U.S. crude oil production is expected to decline by the end of 2026 because of a lack of upstream activity, the U.S. Department of Energy (DOE) has reported.

An explosion in upstream activity in the various U.S. shale basins at the early part of the century helped lead to a surge in production. Exporting oil for the first time in 2015, the U.S. has since become the world leader in crude oil production, besting Saudi Arabia's stated output by around 4 million barrels per day (BBL/d).

With an estimated 11.17 million BBL/d, it's the inland shale basins that account for the bulk of U.S. production. Of that, the Permian Basin in parts of West Texas and New Mexico is the largest contributor, with an estimated 6.54 million BBL/d on average for 2025.

But the Permian Basin is changing. After decades of production, the pressure in a well drops, leaving heavier hydrocarbons trapped in subsurface pores which allows smaller molecules such as natural gas to escape. The Permian is the second-largest gas producer in the nation, and oil production is on pace to decline marginally to 6.53 million BBL/d next year.

Overall, U.S. crude oil production is on pace to decline, the DOE's Energy Information Administration (EIA) reported in its monthly market report for June.

"We forecast U.S. crude oil production will decline from an all-time high of 13.5 million barrels per day in the second quarter of 2025 (2Q25) to about 13.3 million BBL/d by 4Q26 because of decreasing active drilling rigs and declining oil prices," EIA analysts wrote in a report published Tuesday.

Crude oil prices have been a burden on the industry for much of the year. West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, started the year at around $72 per barrel, but it's since declined to the mid-$60 range, though it dropped below $60 earlier this year.

The EIA's Short-Term Energy Outlook report for June put WTI at $62.33 for the full-year average in 2025, dropping to $55.58 per barrel for 2026. That would be nearly $20 per barrel less than the 2024 average, and well below the point at which many shale drillers can make a profit.

Even though drilling efficiencies have improved due to longer laterals and multi-bore wells, lower prices had already become an issue for upstream. The Federal Reserve Bank of Dallas found in an early-year survey that energy firms were worried that U.S. economic policies would undermine growth.

More recently, in comments in the so-called Beige Book, a summary of economic conditions across the various Federal Reserve Districts, the Dallas Fed said last week that activity in the oil and gas sector had eased over the last six weeks.

"Exploration and production firms expect to cut capital spending in the second half of the year by more than initially planned, as rising overseas production will weigh on oil prices," it said. In the Bakken formation in North Dakota, an early-shale era industry darling, state regulators reported that several operators have indicated that lower oil prices may be limiting future activity.

Even with the slowdown in U.S. production, however, the EIA is expecting a market glut to persist into 2026, with inventories swelling by 800,000 BBL/d this year and another 600,000 BBL/d next year due largely to lackluster demand.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).