How Will Slowing Growth in the Permian Basin Impact U.S. Oil Production?

Oil production in the Permian shale basin, stretching across Texas and New Mexico, is poised to experience its slowest growth rate since 2021. This subdued growth is attributed to decreased drilling activities following a string of acquisitions by companies operating in the region.

Impact on U.S. Oil Production

The Permian basin stands as the largest oilfield in the United States. However, its tempered growth will have repercussions on overall U.S. oil production, despite efforts by OPEC+ to stabilize prices.

Reduction in Growth Forecast

In 2023, U.S. oil production soared to a record high of 12.93 million barrels per day (bpd). Yet, the U.S. Energy Administration has slashed its growth forecast for 2024 to 170,000 bpd. This marks a significant decline from the over 1 million bpd growth witnessed in 2023.

Permian Production Dynamics

Although Permian production is anticipated to reach a new height of 5.974 million bpd, it signals the smallest monthly growth rate in recent times. Analysts project a deceleration in Permian growth compared to previous years, with forecasts ranging from an increase of 320,000 to 360,000 bpd.

Influence of Acquisitions

The slowdown in growth is intricately linked to a flurry of acquisitions in the region. Publicly traded companies are now prioritizing dividends and share buybacks over aggressive expansion, resulting in a visible decline in drilling activity as reflected in the reduced number of oil rigs in the Permian.

Shifting Industry Priorities

Despite the potential profitability associated with expanding production, the industry is now emphasizing the generation of positive cash flows. Meanwhile, oil production in the federal Gulf of Mexico is anticipated to witness a modest uptick in 2024.