U.S. Oil and Gas Production Faces Deceleration Amid Lower Prices

U.S. oil and gas production is experiencing slower growth, a reaction to price declines over the past two years. Production from the Lower 48 states increased slightly, but significantly less than previous periods. Lower prices have prompted firms to prioritize efficiency. Meanwhile, U.S. gas production faces sharper declines and lower prices.

U.S. oil and gas production is showing signs of flattening out or declining, as a delayed reaction to the fall in prices over the last two years. This follows the initial shock from Russia's invasion of Ukraine in early 2022.

Total crude and condensate production from the Lower 48 states, excluding federal waters in the Gulf of Mexico, averaged 11.0 million barrels per day (b/d) in May, up from 10.6 million b/d the same month the previous year. However, this seasonal increase is the smallest since the first wave of the coronavirus pandemic in 2020, and before that, the volume war between U.S. shale producers and Saudi Arabia in the mid-2010s.

Data from the U.S. Energy Information Administration (EIA) indicates that production growth compared to the previous year has slowed to 0.4 million b/d from as much as 0.8-1.0 million b/d earlier in 2023. Drilling activity's lagged response to price changes and the additional delay for production to kick in explain this slowdown, reflecting the decline in oil prices from their peak in mid-2022.