COP - Record-breaking U.S. oil production helps thwart Saudi efforts to drive up prices

2023-07-08 20:25:00 ET

U.S. crude oil production is on track to set a record this year , up 9% Y/Y through April, helping to keep energy prices stable and blunt the efforts of Saudi Arabia and other oil exporters to drive them higher.

The Energy Information Administration has forecast total U.S. output will hit 12.61M bbl/day in 2023, topping 2019's record of 12.32M bbl/day and easily beating last year's 11.89M bbl/day.

OPEC and its allies have announced cuts this year amounting to ~6% of 2022's production, but Rystad Energy estimates output in countries outside OPEC is making up for about two-thirds of the reductions, and crude prices have slid 13% YTD.

Half of the new crude is coming from the U.S., where several companies including ConocoPhillips ( COP ), Devon Energy ( DVN ), EOG Resources ( NYSE: EOG ) and Pioneer Natural Resources ( PXD ) delivered strong Q1 production.

ETFs: ( NYSEARCA: XLE ), ( NYSEARCA: XOP ), ( VDE ), ( OIH ), ( XES ), ( IEZ )

Companies' efforts to improve efficiency have provided more ability to remain profitable even when oil prices are falling, and improvements since 2014 have cut the cost of drilling and fracking in rgw U.S. shale by 36%, according to J.P. Morgan.

The increased efficiency means EOG, for example, can earn as much from oil priced at $42/bbl today as it would have from $86/bbl oil in 2014; meanwhile, the budget of Saudi Arabia's government reportedly requires ~$81/bbl oil.

U.S. producers are continuing to seek ways to improve efficiency; Exxon Mobil ( XOM ) CEO Darren Woods has said the industry still recovers only ~10% of the oil it theoretically could from the Permian Basin.

More analysis on oil:

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