S&P Global: US facing steeper-than-expected oil production decline next year
The US is facing a slowdown in oil production growth this year, and a steeper year-on-year overall decline in 2026 than previously anticipated, according to recent analysis by S&P Global Commodity Insights.
The latest update to S&P Global's Global Crude Oil Markets Short-term Outlook reveals that the US, which has been the biggest source of global supply growth in recent years—will be disproportionately impacted by sluggish global oil demand growth and a coming supply surplus.
Following the most recent decision by OPEC+ members to proceed with the accelerated unwinding of production cuts, along with supply growth elsewhere, year-on-year global crude oil (and condensate) production growth is expected to be 2.2 million b/d for second-half 2025 compared to just 390,000 b/d of expected crude oil demand growth.
Annual global total oil (liquids) demand growth for 2025 is expected to be the weakest since 2001—excluding the economic downturn during the 2008–09 financial crisis and the COVID-19 pandemic in 2020—averaging 770,000 b/d.
As a result, S&P Global Commodity Insights has revised down its price outlook, with Dated Brent ranging from the mid-$60s/bbl to $50/bbl or below for a time (low $60—upper $40s for WTI).
“The oil price is currently defenseless. Seasonal demand in the northern hemisphere summer may obscure the impact for a bit, but eventually there will be too much crude oil in the market absent a change in production trends,” said Jim Burkhard, vice-president and global head of crude oil research at S&P Global.
The US is expected to bear the brunt of the impacts from an oversupplied market on account of the nature of US shale production, which is more responsive to price signals compared to other sources of non-OPEC supply such as in Canada, Guyana, and Brazil.
The new outlook expects 2025 US production to average 13.34 million b/d for 2025, a total annual average growth of 131,000 b/d—122,000 b/d lower than the previous outlook.
US production in 2026—already expected to register the first year-on-year decline in roughly a decade, excluding the 2020 COVID-19 pandemic—is now expected to be 12.96 million b/d, around 378,000 b/d lower than the previous outlook.
“In a lower price environment, US operators are likely to protect shareholder returns by reducing upstream spending. The result is a deceleration in growth to end the year, with the greatest impacts to production coming in 2026,” said Burkhard.
By end-2026, US oil production could be down 640,000 b/d from what it was in mid-2025. However, such a decline could set the stage for future price recovery, according to the analysis.
“The US has been the biggest source of supply growth in recent years—and a factor in OPEC+ supply restraint. Signs of weak US crude supply growth and decline could begin to alter oil market psychology. However, much will still depend on the future course of OPEC+ production and oil demand.”
