Crude Oil, Natural Gas Production Decrease Largest in Years

U.S. crude oil and natural gas production declined in April 2020 by 670,000 bbld and 2.6 Bcfd, respectively, according to the U.S. Energy Information Administration’s (EIA) Monthly Crude Oil and Natural Gas Production Report. Production contractions of that size usually happen only in natural disasters such as hurricanes: the drop in U.S. crude oil production in April was the largest since September 2008 when Hurricanes Gustav and Ike caused production to tumble by 1.03 MMbbld. The April 2020 decline in natural gas production was the largest monthly decrease since Hurricane Isaac-related shut-ins in August 2012.

April was the first full month to be affected by the low crude oil and natural gas prices related to the sudden drop in petroleum demand associated with COVID-19 mitigation efforts. The declining market led oil and natural gas operators to shut-in wells and limit the number of wells brought online, lowering the output for the major oil- and natural gas-producing regions.

U.S. crude oil production decreased by 5.3% in April. Several states and regions reported declines: Texas saw the largest crude oil production decrease of 234,000 bbld, or 4.3%, from March to April 2020. More crude oil is produced in Texas than in any other state or region of the U.S., accounting for 41% of the national total in 2019. North Dakota experienced the second-largest decrease, 195,000 bbld, or 13.8%. Both states noted their largest recorded monthly decreases. Of the top six crude oil-producing states, Colorado was the only one to record an increase in April as a result of more new wells coming online than were shut-in.

EIA expects U.S. crude oil production to fall in 2020 as efforts to mitigate the spread of COVID-19 continue to result in a steep drop in demand for petroleum products and lower oil prices. It projects crude oil prices will average $40/bbl of 2020 and will average $39/bbl in the second half of 2020. In its July Short-Term Energy Outlook (STEO), EIA forecasts that U.S. crude oil production will average 11.6 MMbbld in 2020, which iwould be 600,000 bbld below the 2019 average of 12.2 MMbbld.

SOURCE: The Weekly Propane Newsletter, July 23, 2020. Weekly Propane Newsletter subscribers receive all the latest posted and spot prices from major terminals and refineries around the U.S. delivered to inboxes every week. Receive a center spread of posted prices with hundreds of postings updated each week, along with market analysis, insightful commentary, and much more not found elsewhere.