Analysis: EIA: Prices To Drive U.S. Output to Record Highs


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Expectations of an oversupplied market and falling prices 
moving into this year had many analysts forecasting little to no growth in U.S. 
shale. Given the recent surge in oil prices and indications that the current 
supply shortage may last longer than expected, U.S. crude oil production may 
still be far from peaking.

   The Energy Information Administration just last month forecasted U.S. crude 
oil production to have peaked in 4Q2025 at 13.83 million bpd, before gradually 
easing to 13.56 million bpd by the fourth quarter of 2026 and 13.2 million bpd 
by the end of 2027 as oil prices slipped below break-evens for many domestic 
producers.

   The most serious supply disruption in history is changing this calculus. Oil 
prices have already been moving higher in the first two months of the year amid 
intensifying saber-rattling between the U.S., Israel and Iran. The closure of 
the Strait of Hormuz, which cut the world off a fifth of global petroleum 
liquids supply, has sent prices rocketing in March. WTI futures were trading at 
the highest in three and a half years, rendering drilling in the U.S. shale 
patch much more profitable.

   The EIA in its latest short-term energy outlook published Tuesday (3/10) 
adjusted U.S. crude production forecasts higher and now sees it peaking in 
2027. For this year, the upward revision was negligible as production isn't 
expected to pick up before the fourth quarter given the typical delay between 
price movements and production. The new forecast has U.S. crude output average 
13.9 million bpd in the first half of 2027 and 13.83 million bpd over the whole 
year, marking a 3.8% upward revision from the prior estimate.

   The price impact on production will not be immediately visible given the 
long path from finalizing business decisions to drilling to extracting the 
first barrel. Oil prices are likely to stay elevated for long enough to justify 
new wells. U.S. crude output, which the EIA just in February estimated to 
shrink by 2%, is now forecasted to expand by 1.6% between 2026 and 2027.




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