Oil production to hit new high by end of year, EIA says

U.S. crude oil production is expected to reach record levels after U.S. electricity consumption rose to near-record levels in July amid extreme heat, according to the U.S. Energy Information Administration (EIA).

EIA released Tuesday (Aug. 8) the August Short-Term Energy Outlook that shows domestic crude oil production is projected to exceed 12.9 million barrels per day for the first time in late 2023 and to exceed 13 million barrels per day in early 2024 as global oil demand and prices rise.

U.S. crude oil production will average 12.8 million barrels per day in 2023, up 200,000 barrels per day from its July forecast. Global demand for petroleum products and Saudi Arabia’s extended production cuts are expected to contribute to rising oil prices this year.

International benchmark Brent crude oil prices are projected to rise for the remainder of the year and reach $90 per barrel in late 2023. That’s up from $75 per barrel in early July. The price increased throughout the month and surpassed $86 per barrel on Aug. 4.

“We forecast continued growth in domestic oil production, which is bolstered by higher oil prices and higher well productivity in the near term,” said EIA Administrator Joe DeCarolis.

U.S. regular gasoline prices are expected to average about $3.63 per gallon for the rest of the year, up from $3.27 per gallon in EIA’s previous forecast. The higher prices can be attributed to the higher crude oil prices and multiple unplanned U.S. refinery outages this summer.

According to the AAA, the average price for regular gasoline in Arkansas rose 4 cents to $3.48 per gallon on Tuesday from the same day last week and up 39 cents from last month. The price was 11 cents less than at the same time last year. Nationwide, the average is $3.82 per gallon, up 28 cents from last month but down 23 cents from last year.

AAA attributed rising prices to OPEC+ production cuts and noted that Saudi Arabia’s extended cuts are expected “for at least another month.” Meanwhile, gasoline supplies have narrowly risen amid strong demand. Energy industry analysts said the extreme heat is impacting refinery production.

The Short-Term Energy Outlook shows the high temperatures in July and the resulting air conditioning demand led to near-record levels of U.S. electricity consumption. About 388 billion kilowatt-hours of electricity was consumed in the United States during July, which is nearly equal to the record monthly consumption level set in August 2022.

“Most of the country felt some brutal heat in July, and just like last summer, that heat significantly increased electricity consumption,” DeCarolis said.