Goldman Sachs: US oil production boom to continue at least until 2026

The boom in US oil production will continue for at least the next eighteen months, according to Goldman Sachs, writes Business Insider.

Analysts at the financial group expect oil production from the Permian Basin to remain at high levels until the end of 2026, despite a slight slowdown from the 2023 peak. Last year, the United States produced 12.9 million barrels of titium per day - drilling for more oil than any other country in history, according to data from the US Energy Information Administration (EIA).

"Oil production will continue to grow, but at a slower pace in the coming years," the bank's analysts said.

Growth will be largely supported by increased drilling efficiency as well as high oil prices. Drilling operations in the Permian Basin tend to be very price sensitive, with West Texas Intermediate crude expected to remain above the key $50 level for at least the next eighteen months, the Goldman team estimated.

"Drilling efficiency continues to improve amid lower costs and shorter times," Yulia Grigsby, energy economist at Goldman Sachs Research, said in a note.

On the other hand, the slowdown in production will be largely caused by aging oil wells in the Permian Basin, where the production of an average oil platform begins to stagnate after three to four years. In addition, the number of active oil rigs in the region fell by 30% from the 2018-2019 average and will likely continue to decline until the end of 2026, analysts at the financial group estimated.

According to them, production from one well may increase to 100 barrels per day this year, but will slow to about 50 barrels per day starting in 2025.

"Years of intense exploration and production have impacted the quality of the rocks in the basin, leading to geological deformations that limit improvements in oil well productivity," Goldman analysts said.

Oil prices have risen this year following OPEC+ supply cuts and escalating geopolitical tensions in the Middle East. Goldman predicts oil demand will grow over the next ten years, suggesting there is a risk of a market shortage. On the other hand, the US Energy Information Administration claims that demand will peak before 2030, writes Business Insider.