U.S. oil production won't reach pre-Covid high until 2023, analyst says
(Bloomberg) — Even as crude prices hurtle toward $100 a barrel, U.S. oil output won’t be able to reach its pre-pandemic high until later next year as inflation and production logjams present obstacles to the industry’s recovery.
That’s according to Elisabeth Murphy, an analyst at industry consultant ESAI. While Murphy estimates that the U.S. is set to add 900,000 barrels a day of supply this year, she pointed to rising costs and issues with drilling as factors that are holding back more growth.
New drilling isn’t keeping up with number of well completions, the final step before oil begins flowing. Keeping a good log of newly drilled wells is necessary to maintain and grow production, Murphy said during a webinar.
Service-sector price inflation is also an issue, and one that could restrain production growth, she said, noting that the cost of sand for fracking purposes has tripled in the Permian basin, the world’s most prolific oil patch. Other factors that could slow supply recovery include more regulations such as methane rules, rising royalty rates and further industry consolidation, she said.
Crude prices have surged 40% since early December to more than $90 a barrel. Many producers have been eager to take advantage of the rally, with U.S. drillers adding the most rigs in four years last week. This week, the U.S. government reported that the Permian reached record volumes of oil supply for three consecutive months. But even with that expansion, global crude supplies aren’t keeping up with robust demand amid some production limitations.