Energy Indicators

November 07, 2024

The U.S. rig count declined year over year in October and has been easing over the last three months. The Permian Basin had the steepest decline in oil drilling compared with other U.S. basins. A consensus projection, which is the average of multiple recent forecasts, projects U.S. oil production will grow through 2025 and global oil consumption will also increase.

Rigs

The total U.S. oil rig count declined 4.8 percent year over year in October and decreased 9.3 percent over the past three months. The Permian Basin held on to 301 oil-directed rigs in October, down from its post-pandemic peak of 357 rigs in May 2023 (Chart 1). The Permian shed 5 oil rigs year over year in October, and in the past three months the number remained unchanged.

The oil rig count in the Bakken Shale remains stable compared to last year. Over the past three months it shrunk by 1 rig. The Eagle Ford Shale's oil rig count fell 7 rigs compared to October last year. Over the past three months, the Eagle Ford rig count dropped by 15.

Despite the slight declines in rig count over the past year, U.S. crude production increased an estimated 0.17 million barrels per day (mb/d) in October according to the Energy Information Administration's most recent Short-Term Energy Outlook.

U.S. natural gas drilling dropped 16 rigs year over year. Over the past three months, the number of natural gas rigs declined by 16 . Over the past year, the national benchmark Henry Hub gas price fell from $3.24 per MMBtu to $2.03. In the third quarter release of the Dallas Fed Energy survey, one of the special questions asked about the impact of low Waha hub natural gas prices on the oil and gas sector. Of the executives surveyed, 35 percent attributed their decision to curtail production to low Waha gas prices. For reference, the average price of natural gas at the west Texas Waha Hub was -1.8 cents per MMBtu.

Market outlook

U.S. oil production set to grow at a steady pace through 2025

According to a consensus of views that is an average of several projections, U.S. crude oil production growth is expected to remain steady through this year. Fourth quarter production will grow an estimated 0.3 mb/d year over year to 13.5 mb/d (Chart 2).

Global oil consumption to grow steadily through 2025

Global oil consumption is expected to grow 1.5 mb/d in 2024 and 1.1 mb/d in 2025. (Chart 3). Initially, consumption in 2024 was expected to grow significantly faster than it did. Instead of rapid growth, 2024's global consumption is expected to be consistent with the prepandemic decade average of about 1.4 mb/d. This change from significant growth to conventional growth can be attributed mainly to anemic consumption growth in China, the world's biggest oil consumer.

Crude stocks tighten in 2024, become balanced in 2025

According to a consensus of major energy agencies, consultancies and investment banks, global crude oil supply is expected to fall short of consumption growth in the second half of 2024, with an average 0.4 mb/d decrease per quarter (Chart 4). This can be partially explained by the OPEC+ policy of withholding production to support the price of Brent crude oil.

Outlook for China

Chinese crude oil consumption is set to remain relatively stable from 2024 to 2025, with average year-over-year growth of 0.15 mb/d in the fourth quarter of 2024 and 0.27 mb/d in 2025 (Chart 5). Both growth figures represent a marked slowdown from recent history. In the decade prior to the Great Recession, average annual growth was closer to 0.34 mb/d, and in the 2010s it was closer to 0.58 mb/d.

The current slowdown is due to both cyclical and structural factors. China has been experiencing an economic slowdown, which has translated into expectations of slower oil consumption growth. China has also been ramping up production of electric vehicles and fueling more intermodal transport with compressed and liquified natural gas instead of diesel. Both have put downward pressure on China's crude oil consumption growth.

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