US oil output set for first annual drop since pandemic
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US oil production will fall next year for the first time since the Covid-19 pandemic, according to a government forecast that will cast new doubt on Donald Trump’s “energy dominance” agenda.
The Energy Information Administration, a division of the energy department, on Tuesday said US oil production would drop from a record high of 13.5mn barrels a day now to about 13.3mn barrels by the end of next year, as slumping oil prices rattle the sector.
“With fewer active drilling rigs, we forecast US operators will drill and complete fewer wells through 2026,” the EIA said in a monthly report published on Tuesday. Active rigs had “decreased by much more” than it expected in a previous report, it said.
The gloomy official forecast comes just months after Trump was re-elected following a presidential campaign in which he vowed to “unleash” American drilling, promote more oil production, and drive down energy prices.
Soaring shale production in the past two decades made the US the world’s biggest oil and gas producer, upending global commodity markets while feeding domestic industry with a steady stream of cheap energy.
Annual production last fell in 2021, during the Covid-19 pandemic in Trump’s first term, but recovered as oil prices rose during Joe Biden’s administration.
The new government forecast, which echoes predictions from shale executives, underscores the stresses facing the sector as rising supply from the Opec+ cartel and anxiety about the impact of Trump’s trade wars on the global economy push down crude prices.
Trump’s tariffs on steel and aluminium imports have also raised costs for steel and other crucial inputs in the oil sector, squeezing drillers’ margins, say executives.
Oilfield services company Baker Hughes last week said the number of oil rigs operating in the US was down to 442, a drop of nine in one week, and 50 fewer than a year earlier.
West Texas Intermediate, the US oil benchmark, settled at $64.98 a barrel on Tuesday, down 17 per cent since the high this year — and below the price needed by many shale drillers to break even. The EIA said international oil prices would fall to less than $60/b in 2026.
“The current administration is causing a lot of chaos. I’m really concerned that there’s not a plan,” Wil VanLoh head of private equity firm Quantum Capital Group, one of the shale patch’s biggest investors, told the Energy Capital Conference in Houston last week.
Some analysts expect US oil output to fall more steeply in the coming months. S&P Global Commodity Insights this week said total production could fall by 640,000 b/d from mid-2025 to the end of next year — a drop greater than the total produced by some Opec countries.
