Oil production in January in the U.S. reached a record high of 12 million barrels of oil a day, up 90,000 bpd from December 2018.
The U.S. Energy Information Administration called it another all-time U.S. oil output record, breaking the previous record of 11.91 MMbopd set in December.
Last November, the EIA had estimated U.S. production would exceed the 12-MMbopd mark in the second quarter of 2019. But with three more months of production, the EIA now predicts U.S. crude oil production to average 12.4 MMbpd in 2019 and hit 13.2 MMbpd in 2020.
Most of the growth is anticipated from the Permian Basin in West Texas and New Mexico.
Overall, U.S. oil production increases are largely the result of continued production growth in the tight-oil formations of the Permian region, as well as the expectation that 19 new projects will start during 2019 and 2020 in the federal offshore Gulf of Mexico (GOM).
“Favorable geology, combined with technological improvements, has contributed to the Permian region becoming one of the more economic regions for crude oil production in the United States,” explained the agency.
EIA forecasts that Permian production will average 4.2 MMbopd in 2019, a 750,000-bopd increase from 2018, and 4.7 MMbopd in 2020, a 530,000-bopd gain over 2019’s level. Despite pipeline capacity constraints, the Permian region’s month-over-month growth averaged nearly 100,000 bopd for nearly all of 2018, exceeding EIA’s expectations, as expressed in monthly Short-Term Energy Outlook (STEO) revisions.
Pipelines can’t slow the flow. Even West Texas pipeline constraints could not completely slow down the U.S. oil output juggernaut. Starting in second-quarter 2018, pipeline capacity constraints contributed to West Texas Intermediate (WTI)-Midland crude oil averaging more than a $14/bbl discount to WTI-Cushing from July through September, and reaching a $16/bbl discount in August.
In response to the increasing WTI-Midland price discount, Permian-region production growth was expected to start to slow until more pipeline capacity was built, noted EIA. However, from July to September 2018, when the Midland-Cushing spread was at its widest, the Permian basin production rate grew by more than 290,000 bopd and continued to grow by more than 170,000 bopd from September to November.,