WTI Sheds Over 2% As Goldman Sachs Heralds U.S. Crude Output Growth

U.S. benchmark crude oil, West Texas Intermediate (WTI) shed over 2% on Monday, shortly after Goldman Sachs said US crude would account for 60% of non-OPEC output growth this year. 

At 1:13 p.m. ET on Monday, WTI was trading down 2.13% at $75.52, while Brent crude was trading down 2.02% at $79.49, moving away from its $80 marker. 

Oil prices are likely responding to the conflict in the Middle East, with Israel on Monday saying it would seek to avoid a full-blown regional war in the wake of a deadly Hezbollah strike on the Golan Heights over the weekend. 

Earlier on Monday, Goldman Sachs predicted that U.S. crude output would increase by 500,000 barrels per day (bpd) in the current year, a slower growth clip compared to last year’s increase of more than 1 million bpd. Still, the U.S. will account for 60% of non-OPEC production growth, with the Permian expected to post an annual growth of 340,000 barrels per day (bpd), down from an early-year forecast of 520,000 bpd by the Wall Street bank.

According to GS, technological and efficiency gains have accounted for virtually all growth by the Texas-New Mexico shale basin since 2020; however, the bank has warned that “the Permian is maturing, and its deteriorating geology will weigh on the production of crude oil down the road.”

The Permian rig count has declined nearly 15% from last year’s April high to 309 currently, and is 30% lower than its 2018-2019 average, Goldman Sachs has revealed. GS has predicted that Permian rig count will be below 300 by the end of 2024.

However, Goldman says that output per rig will keep growing, “as industry consolidation increases the share of more productive rigs, and as technologies improve”. 

“This year, every stage of a well’s building cycle in the Permian was 20-50 percent faster than in 2019, with the total average time from rig to production decreasing by a third to 63 days. This acceleration will boost the share of new and productive wells amid the stock of declining wells,” according to Yulia Grigsby, an energy economist at Goldman Sachs, as reported by Reuters.

Earlier, OPEC predicted that global oil demand growth would significantly outpace non-OPEC supply growth over the next two years. According to OPEC,  global demand growth will clock in at  2.25 million b/d in 2024 and 1.8 million b/d in 2025, well above non-OPEC supply growth at 1.34 million b/d in 2024 and 1.27 million b/d in 2025 thanks to a stronger Chinese economy grows stronger. The U.S., Canada, Brazil and Guyana are expected to contribute the majority of non-OPEC production growth.

By Charles Kennedy for Oilprice.com

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