Investment Bank Report: Multiple Indicators Show Weak Momentum in US Oil Production Growth

The Trump administration was ambitious in its energy policies. US Treasury Secretary Bentsen once publicly introduced his "3-3-3 Plan," which aimed to increase the real GDP growth rate to 3%, reduce the annual budget deficit from 7% of GDP to 3%, and boost US domestic oil production by 3 million barrels per day (bpd).

However, economists and energy experts have warned that Bentsen's goals have little basis in reality. Despite the Trump administration's policies favoring fossil fuels, US oil production is likely to remain flat or decline, as low oil prices make it unprofitable for oil companies.

Commodity experts at Standard Chartered Bank predict that US crude oil supply may decline by 158,000 bpd in 2025 and by 183,000 bpd in 2026, ending the growth momentum of the past four years under the Biden administration.

Previously, the Federal Reserve Bank of Dallas noted in a survey that the breakeven point for US shale oil producers is a WTI crude oil price of $65 per barrel. Over the past month, WTI prices have mostly remained below this breakeven point, partly due to the OPEC+ alliance's decision to increase production.

What do the data reveal?

Standard Chartered Bank analyzed four reasons for its pessimism about US oil production growth from four data dimensions. First, according to the revised monthly data from the US Energy Information Administration (EIA), US crude oil production reached a record high of 13.488 million bpd in March. However, the average daily increase over these three months was only 30,000 bpd, compared to a growth of 270,000 bpd in 2024.

The EIA, which is usually seen as optimistic about production growth, also predicts that US crude oil production will increase slightly from 13.2 million bpd in 2024 to 14 million bpd in 2027, an increase that is only about a quarter of what Bentsen promised.

Secondly, according to data from energy company Baker Hughes, the number of US oil rigs has decreased by 41 this year and by 50 on a YoY basis. Part of the decline is due to improvements in drilling technology and processes, but Standard Chartered warns that this downward trend has persisted for 30 months.

In addition, the number of frac crews has also plummeted to 186, a significant decline from the 300 crews during the peak of the COVID-19 pandemic. Finally, the number of drilled but uncompleted (DUC) wells has also halved from the pandemic peak in June 2020, reaching a low of 4,494 in February this year before stabilizing.

The number of frac crews can serve as a supplementary indicator for measuring US shale oil and gas production, while the DUC well count may be a leading indicator of any shifts in completion activity. A decline in the DUC well count suggests that drilling activity is weakening.

From a data perspective, it is evident that US energy companies have significantly reduced their investments in drilling to preserve profits and remain accountable to shareholders. The immediate impact of this decision may be a stabilization or decline in US energy production, thereby exerting upward pressure on oil prices.