The United States is a major producer of crude oil, and its production levels have a significant impact on the global energy market. In recent years, the US has experienced a boom in oil production, driven by advances in technology and the development of new oil fields. This article examines the breakeven prices for US oil producers and the factors driving the growth in US crude oil production.
Key Facts
- Breakeven prices: In the Eagle Ford region, oil producers needed WTI oil prices of at least $56 per barrel to profitably drill a new well, while existing wells had a breakeven price of $31 per barrel.
- Productive oil basins: The Eagle Ford basin has the lowest average breakeven prices for new wells, while the Permian basin has even lower breakeven prices for existing wells. The Permian basin is the largest US oil production region, with production exceeding five million barrels per day in 2023.
- US crude oil production: The US Energy Information Administration (EIA) forecasts that crude oil production in the US will average 12.4 million barrels per day in 2023 and 12.8 million barrels per day in 2024, surpassing the previous record set in 2019.
- Factors driving production growth: Increased production in the Permian region and the Federal Offshore Gulf of Mexico (GOM) are driving the forecasted growth in US crude oil production. Completion of new natural gas pipelines in the Permian region will allow for increased transportation of associated natural gas, removing a potential constraint on crude oil production.
- Crude oil price forecast: The EIA forecasts that the US benchmark West Texas Intermediate (WTI) crude oil price will average $77 per barrel in 2023 and $72 per barrel in 2024. Despite declining prices, the WTI price is expected to remain high enough to support crude oil production growth, especially in the Permian region.
Breakeven Prices for US Oil Producers
The breakeven price for an oil producer is the price at which the producer can cover all of its costs, including the cost of drilling, production, and transportation. Breakeven prices vary depending on the location of the oil field, the type of oil being produced, and the efficiency of the producer’s operations.
According to a survey conducted by the Dallas Fed in 2023, oil producers operating in the Eagle Ford region of Texas needed a West Texas Intermediate (WTI) oil price of at least $56 per barrel to profitably drill a new well. Existing wells in the Eagle Ford region had a breakeven price of $31 per barrel.
The Permian Basin, located in Texas and New Mexico, is the largest oil-producing region in the United States. Oil producers in the Permian Basin have lower breakeven prices than producers in other regions. In 2023, the breakeven price for new wells in the Permian Basin was $45 per barrel, while the breakeven price for existing wells was $27 per barrel.
Factors Driving Growth in US Crude Oil Production
The growth in US crude oil production is being driven by a number of factors, including:
1. Increased Production in the Permian Region: The Permian Basin is the largest oil-producing region in the United States, and it is responsible for a significant portion of the growth in US crude oil production. The Permian Basin is home to a number of large oil fields, including the Spraberry and Wolfcamp formations. Advances in drilling technology, such as horizontal drilling and hydraulic fracturing, have made it possible to extract oil from these formations more efficiently.
2. Development of New Oil Fields: In addition to the Permian Basin, new oil fields are being developed in other parts of the United States, including the Gulf of Mexico and the Bakken Formation in North Dakota. These new oil fields are helping to boost US crude oil production.
3. Completion of New Natural Gas Pipelines: The completion of new natural gas pipelines in the Permian region has helped to remove a potential constraint on crude oil production. Associated natural gas is often produced along with crude oil, and if there is not enough pipeline capacity to transport the natural gas, it can limit the amount of crude oil that can be produced.
4. Favorable Crude Oil Prices: The price of crude oil has been relatively high in recent years, which has made it profitable for oil producers to increase production. The EIA forecasts that the WTI crude oil price will average $77 per barrel in 2023 and $72 per barrel in 2024.
Conclusion
The United States is a major producer of crude oil, and its production levels have a significant impact on the global energy market. The growth in US crude oil production is being driven by a number of factors, including increased production in the Permian region, the development of new oil fields, the completion of new natural gas pipelines, and favorable crude oil prices. The EIA forecasts that US crude oil production will continue to grow in the coming years, reaching new record levels in 2023 and 2024.
FAQs
What is the average breakeven price for oil producers in the US?
The average breakeven price for oil producers in the US varies depending on the location of the oil field, the type of oil being produced, and the efficiency of the producer’s operations. However, according to a survey conducted by the Dallas Fed in 2023, oil producers in the Eagle Ford region of Texas needed a West Texas Intermediate (WTI) oil price of at least $56 per barrel to profitably drill a new well. Existing wells in the Eagle Ford region had a breakeven price of $31 per barrel.
Which US oil-producing region has the lowest breakeven prices?
The Permian Basin, located in Texas and New Mexico, has the lowest breakeven prices for oil producers in the US. In 2023, the breakeven price for new wells in the Permian Basin was $45 per barrel, while the breakeven price for existing wells was $27 per barrel.
What factors are driving the growth in US crude oil production?
The growth in US crude oil production is being driven by a number of factors, including increased production in the Permian region, the development of new oil fields, the completion of new natural gas pipelines, and favorable crude oil prices.
How much crude oil does the US produce per day?
The US is a major producer of crude oil, and its production levels have a significant impact on the global energy market. In 2022, the US produced an average of 11.9 million barrels of crude oil per day. The EIA forecasts that US crude oil production will average 12.4 million barrels per day in 2023 and 12.8 million barrels per day in 2024, surpassing the previous record set in 2019.
What is the forecast for crude oil prices in the US?
The EIA forecasts that the WTI crude oil price will average $77 per barrel in 2023 and $72 per barrel in 2024. Despite declining prices, the WTI price is expected to remain high enough to support crude oil production growth, especially in the Permian region.
How does the cost of producing oil in the US compare to other countries?
The cost of producing oil in the US is relatively low compared to other countries. According to a study by Rystad Energy, the average cash cost to produce a barrel of oil in the US in 2023 was $33.40. This is significantly lower than the average cost of production in other major oil-producing countries, such as Saudi Arabia ($10.30 per barrel), Russia ($15.80 per barrel), and Norway ($38.90 per barrel).
What are the environmental impacts of oil production in the US?
Oil production in the US has a number of environmental impacts, including air pollution, water pollution, and land degradation. Air pollution from oil production can contribute to respiratory problems and other health issues. Water pollution from oil production can contaminate drinking water sources and harm aquatic life. Land degradation from oil production can result in the loss of habitat for wildlife and the displacement of people.
What are the future prospects for oil production in the US?
The future prospects for oil production in the US are uncertain. The EIA forecasts that US crude oil production will continue to grow in the coming years, reaching new record levels in 2023 and 2024. However, the growth in US oil production could be constrained by a number of factors, including declining oil prices, increasing costs, and environmental regulations.