US Oil Supply Downgrade Explained

Oilfield services headwinds behind big cut in U.S. oil supply forecast as mild weather lifts U.S. gas inventories

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released its latest quarterly FundamentalEdge report that provides its medium-term outlook on oil and gas balances. This edition explains why EIR cut its forecast for U.S. production growth, a result of the headwinds created by oilfield services limitations, the risk of recession and reduced performance from wells drilled recently in the Permian Basin.

“In U.S. gas markets, mild weather through the first half of November has helped storage build, lifting inventories to approximately 3.6 Tcf before winter withdrawals start. On average for winter, we expect a storage deficit to the five-year average of 170 Bcf with prices at $5.30/MMBtu,” said Jonathan Snyder, report author and a vice president at EIR.

“Russian oil supply outperformed our expectations mid-year, with European buyers slow to phase out term contracts and discounted cargoes redirected to India and China. However, hard-hitting European sanctions will come into effect in December, which we expect will reduce Russian crude production to about 9MMbbl/d,” said Bill Farren-Price, an EIR director.

Key takeaways from the report

• EIR’s Lower 48 oil production forecast has been significantly downgraded and the firm now expects growth of ~450 Mbbl/d E/E for 2022 and 560 Mbbl/d for 2023.
• U.S. natural gas supply growth has surprised on the upside, touching 100 Bcf/d sooner than anticipated. EIR now expects strong growth for 2022 at ~3.4 Bcf/d E/E.
• EIR expects the gas inventory deficit to flip to a surplus by early summer 2023, further reducing prices toward $3.50/MMBtu until 2026.
• Members of the media should contact Jon Haubert to schedule an interview with one of Enverus’ expert analysts.

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About Enverus Intelligence Research
Enverus Intelligence Research, Inc. is a subsidiary of Enverus and publishes energy-sector research that focuses on the oil and natural gas industries and broader energy topics including publicly traded and privately held oil, gas, midstream and other energy industry companies, basin studies (including characteristics, activity, infrastructure, etc.), commodity pricing forecasts, global macroeconomics and geopolitical matters. Enverus Intelligence Research, Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser.