EIA raises U.S. crude output forecast for 2022

(Bloomberg) --American oil explorers will boost drilling and production later this year as crude prices are set to stay above $50 a barrel, according to a U.S. government report.

Supply from new wells will exceed declining flows from wells already in service, raising overall crude production from the second half of this year, the Energy Information Administration said in its Short-Term Energy Outlook. The agency increased its forecast for 2022 U.S. crude output to 11.53 million barrels a day, up from January’s estimate of 11.49 million.

Production in the shale patch has been ravaged by the pandemic. Domestic crude production is hovering below 11 million barrels a day, down from a peak of 13 million reached last year in January. The oil price plunge in early 2020 that swept crude into negative territory caused companies to slash capital spending and reduce drilling programs. U.S. crude futures have rebounded 20 percent so far this year.

Despite the EIA’s expectation for rising production in the second half, the agency sees U.S. output declining in the coming months, hitting 10.9 million barrels a day in June, with the number of active drilling rigs below year-ago levels. The agency estimated 2021 production at 11.02 million barrels a day this year, down from a previous forecast of 11.1 million.

The EIA forecast U.S. petroleum demand this year at 19.44 million barrels a day, down from its previous projection of 19.51 million. The EIA said it does not see domestic petroleum consumption reaching pre-pandemic levels this year or next.

U.S. explorers typically need to drill new wells regularly just to keep up production because output from shale declines quickly, sometimes in a matter of months.