Several prominent U.S. shale producers are set to raise their oil production this year beyond initial expectations, signaling that national supply might surpass the modest growth forecasts that many companies had committed to. EOG Resources Inc., a major independent shale player, along with Coterra Energy Inc. and Civitas Resources Inc., all revised their 2024 production forecasts upward on Thursday. Civitas noted unexpected strong well performance in the Permian Basin, North America’s busiest oil field, where five producers recently reported surprisingly positive results. Ovintiv Inc. and Matador Resources Co. also recently announced increased output.
This trend, observed among a select group of publicly traded companies, suggests a potential acceleration in U.S. shale output, which could impact global oil prices and complicate efforts by the Organization of Petroleum Exporting Countries (OPEC) to manage market stability.
OPEC and its allies, known collectively as OPEC+, are expected to adhere to their plan to gradually increase oil output starting in October. This strategy, aimed at countering the production cuts implemented in late 2022, will see an incremental addition of about 540,000 barrels per day over the fourth quarter.
The simultaneous rise in U.S. oil production and OPEC+ output may lead to an oversupplied market and potentially lower prices if global demand does not keep pace. U.S. oil prices often gain prominence in presidential election years, with gasoline prices serving as a key economic indicator for voters. The OPEC output increase might coincide with the U.S. election period, adding another layer of complexity to the market dynamics.
EOG Resources has adjusted its high-end production forecast to 491,800 barrels of crude and condensates per day, up from a previous estimate of 490,000 barrels. Coterra Energy has raised its annual oil production forecast to a range of 105,500 to 108,500 barrels, reflecting a 2.4% increase from its prior projection while maintaining its spending outlook.
Additionally, Exxon Mobil Corp. and Chevron Corp. have indicated that they are on track to boost Permian production by 10% this year. The two major energy companies are scheduled to report their earnings early Friday.
Meanwhile, drilling activity in the Permian Basin has decreased by 2% this year, reaching its lowest level in over two years, according to Baker Hughes. However, advancements in efficiency are enabling U.S. producers to increase output while keeping expenditures relatively stable, thus allowing for greater cash returns to investors.
