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EIA CRUDE OIL PRICES forecasts

January 14, 2022

At the January 2022 OPEC+ meeting, participants reaffirmed their decision to continue to increase production by 0.4 million b/d monthly, with future adjustments possible depending on market conditions. Our forecast assumes that OPEC member countries will not fully increase production in accordance with their targets in 2022. We expect that some countries will be unable to meet their new targets because of wide-ranging challenges to bring idled capacity back online, and other countries will limit increases to avoid large global imbalances between oil production and oil demand. OPEC crude oil production averaged 26.3 million b/d in 2021, and we forecast that OPEC crude oil production will increase by 2.5 million b/d to average 28.8 million b/d in 2022 and increase slightly to 28.9 million b/d in 2023.

U.S. crude oil production in 2021 averaged 1.1 million b/d lower than the annual record high of 12.3 million b/d set in 2019. We expect annual average U.S crude oil production will increase to 11.8 million b/d in 2022 and to 12.4 million b/d in 2023. Tight oil wells have steep declines in the early years of their production, requiring continuous drilling of new wells to maintain production rates. The increasing forecast production reflects oil prices that we expect will be sufficient to contribute to continued increases in the pace of upstream development activity that will more than offset decline rates. We expect production will increase for most of 2022 as more new wells come online. For U.S. tight oil production, our models include a four- to six-month lag between a change in oil price and change in production. We expect the recent West Texas Intermediate (WTI) crude oil price, which averaged more than $70/b during most of the second half of 2021 (2H21), and average forecast WTI prices of $74/b during 1H22 will contribute to an increased number of active drilling rigs and production growth in the Lower 48 states (L48). We expect annual average L48 production of 9.6 million b/d for 2022, which is 3% lower than the 2019 record high of 9.9 million b/d.

We expect the WTI crude oil price will average $71/b in 2022. Although down from the current price, it is still sufficient for producers to realize positive cash flows in many areas, particularly the more productive areas of the Permian Basin. Most of L48 growth in the forecast comes from the Permian Basin. In 2023, we expect that declining oil prices will contribute to slower rig additions, and production growth in the L48 will slow from 0.6 million b/d in 2022 to 0.5 million b/d in 2023. We forecast that L48 crude oil production will average 10.2 million b/d in 2023. Despite the slowing growth, we expect total crude oil production in the United States will average 12.4 million b/d in 2023, slightly surpassing the record high set in 2019 (Figure 3).