The U.S. Energy Information Administration, in its latest Short-Term Energy Outlook, made a bold forecast that U.S. crude oil production will surge to new records over the next two years. The agency raised its 2024 U.S. crude production forecast to an average of 13.2M barrels per day, with a further increase to 13.4M barrels per day in 2025, both of which are records. The EIA attributed this growth to increased well efficiency for the expected growth in rigs.

While U.S. crude production is expected to rise by 290,000 barrels per day this year, the agency cautioned that the growth rate is likely to slow from the 1 million barrels per day increase in 2023 due to lower drilling activity.

The EIA also anticipates solar power to be the leading source of growth in U.S. electricity generation in both 2024 and 2025. The agency projects 36 gigawatts and 43 gigawatts of new solar capacity to come online in 2024 and 2025, respectively, lifting the solar share of total generation to 6% in 2024 and 7% in 2025, a significant rise from 4% in 2023.

In addition, the EIA forecasted that OPEC+ production, excluding Angola (which recently left the cartel), will drop by 620,000 barrels per day to 36.44 million barrels per day in the next year. This is a decrease from the five-year average of 40.2 million barrels per day before the COVID pandemic.

The EIA noted, “Although we expect OPEC+ to restrict production to prevent prices from falling, we still anticipate global production to exceed consumption by mid-2025, and therefore for petroleum inventories to increase.”

The oil market, discounting the forecasts, moved higher on that Tuesday, recovering some of the prior session’s sharp losses. The front-month Nymex crude for February delivery settled at $72.24 per barrel, up 2.1%, and March Brent crude closed at $77.59 per barrel, up 1.9%.

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