Slowing US oil production growth: what it means for global markets

The global oil market, long driven by robust production growth outside of the OPEC+ coalition, is entering a phase of deceleration. According to the latest S&P Global Commodity Insights report, production growth, particularly in the United States, is slowing down, which could have significant implications for the global oil landscape over the next few years.

A shift in US production

The United States has been a key player in the global oil market, often leading non-OPEC+ production growth. However, the latest outlook from S&P Global Commodity Insights indicates a marked slowdown. The forecast for US crude oil production growth for the second half of 2024 has been revised downward by 174,000 barrels per day (b/d), with the new expected growth rate now standing at 182,000 b/d. For 2025, the outlook is even less optimistic, with growth expectations reduced by 311,000 b/d to a total of 429,000 b/d.

Jim Burkhard, Vice President and Head of Research for Oil Markets, Energy and Mobility at S&P Global Commodity Insights, explained the reason behind this adjustment: "There has been less upstream activity so far this year than previously anticipated. That is a reflection of expectations for decelerating demand growth and lower prices."

Despite the slower growth, the US is still expected to achieve record production levels by 2025. However, the margin by which these new records will surpass previous highs has been significantly reduced.

Global impact: surplus and prices

While US production growth is slowing, this does not necessarily signal a rise in global oil prices. OPEC+, the coalition of major oil-producing countries, has reaffirmed its plans to increase production later this year. This expected rise in output from OPEC+ means that, despite lower-than-expected growth from non-OPEC+ producers, the global oil market could still be oversupplied in 2025.

Burkhard highlighted this dynamic, noting, "The pace of supply growth is slowing, but that coincides with decelerating global demand. Factor in the prospect of additional OPEC+ barrels coming into the mix, and it all adds up to a potentially oversupplied crude market in 2025."

The analysis suggests that the combination of slower supply growth from non-OPEC+ producers and additional output from OPEC+ could result in lower average crude oil prices in 2025 compared to 2024.

The implications of this slowdown in US oil production growth are significant. For one, it reflects broader economic trends, including a deceleration in global demand growth and lower expected oil prices. Furthermore, it underscores the delicate balance within the global oil market, where production decisions by key players like OPEC+ can dramatically influence supply and prices.

As the global market approaches 2025, stakeholders will need to closely monitor production trends, both within and outside OPEC+, to navigate the complexities of an increasingly volatile oil landscape. The next few years may well see a continuation of oversupply, but with the ever-present potential for shifts in production policy, the market remains on uncertain ground.