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US oil production is set to peak in 2027, with limited global competition and weakening demand growth raising concerns over future market stability and price volatility
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The annual energy outlook 2025 of the US (United States) Energy Information Administration (EIA) has projected a US oil production peak in 2027. The US is the World’s top oil producer, and has produced more crude oil than any nation in 2018-2024. Crude oil production in the US, including condensate, averaged 12.9 million barrels per day (b/d) in 2023, breaking the previous US and global record of 12.3 million b/d, set in 2019. In 2024, production exceeded 13.2 million b/d. According to the EIA, the crude oil production record of the US is unlikely to be broken by any other country in the near term because no other country has reached the production capacity of 13.0 million b/d. Only Saudi Arabia and Russia have the potential to match US oil production, but global market prices may not offer sufficient incentive to ramp up output. Oil demand growth has peaked in the Global North. The effort to decarbonise transportation is limiting growth in demand for crude oil, which in turn is containing oil price increases. Unlike the US, where oil production decisions are influenced primarily by market fundamentals and geology, oil production decisions by Saudi Arabia and Russia could be influenced by factors other than market fundamentals.
Only Saudi Arabia and Russia have the potential to match US oil production, but global market prices may not offer sufficient incentive to ramp up output. Oil demand growth has peaked in the Global North.
In 1970, US oil production peaked at 9.6 million b/d and then fell to a low of 5.0 million b/d in 2008. Production started increasing again in 2009 following what was labelled the “shale revolution” that applied hydraulic fracturing and horizontal drilling techniques to produce light tight oil (LTO) and natural gas. Since 2009, US oil production grew consistently till 2020, with production of LTO from shale basins accounting for most of the growth. In 2020, oil production growth in the US slowed down because of the pandemic, but it quickly revived in 2022 to over 10.5 million b/d to match the pre-pandemic peak in 2018. In 2024, over 66 percent of US oil production came from tight oil basins. In 2023, US oil production exceeded expectations, growing by more than 1 million b/d. In 2024, oil production growth declined by 0.5 million b/d but accounted for over 60 percent of non-OPEC (Organisation of Petroleum Exporting Countries) production growth. Despite the decline in production growth, US crude oil production grew by 370,000 b/d in 2024 to average 13.2 million b/d.
Permian is the World’s largest hydrocarbon (shale) basin, which has accounted for all the growth in US crude LTO production since 2020. In 2024, the Permian region produced more crude oil than any other region, accounting for 48 percent of total US crude oil production. Even with a lower rig count in 2024 compared to 2023, Permian production grew because well productivity improved. Producers used technological advancements such as artificial intelligence, electronic hydraulic fracturing technology, and automated drilling processes to optimise operations. Despite an increase in efficiency in LTO production, the larger trend is one of a slowdown in production growth. According to the EIA, production will increase to about 14 million b/d in 2027, after which production will decline to about 13.8 million b/d in 2030. US production will fall to just over 11.9 million b/d by 2040.
In 2023, the US, Russia and Saudi Arabia accounted for 42 percent (33 million b/d) of global oil production, a significant increase in share from 29 percent (20 million b/d) of the global total in 2000. Russia, Saudi Arabia and the US have produced more oil than any others since 1971, although the top spot has shifted among them over the past five decades. By comparison, the next three largest producing countries—Canada, Iraq, and China—together produced 13.4 million b/d in 2023, only slightly more than what was produced in the US alone. In 2000, Saudi Arabia was the largest producer of crude oil with a production of 11.8 million b/d. In 2006, Russia became the top producer with the production of over 12.7 million b/d compared to Saudi Arabia’s production of 12.5 million b/d. The US was a distant third with a production of 6.7 million b/d. Russia maintained the top position as the World’s largest oil producer till 2019 when the US rose to the top with a production of 14.7 million b/d. Russia was pushed to the second spot with a production of 13.4 million b/d followed by Saudi Arabia with a production of just over 12.1 million b/d.
The rise of the US as the largest producer and a significant exporter of crude meant that the US could replace Saudi Arabia as a swing producer that responds quickly to market signals.
Saudi Arabia has retained the top position as the largest net exporter of crude oil since the 1980s, except for a brief period in the early 1980s when Russia was the top exporter. In 2020, the US emerged as a net exporter of crude, with gross volume of exports exceeding the export volume of Saudi Arabia. In 2021, the US was a net importer of crude, but in 2022 & 2023, the US was once again a net exporter of crude, with gross volume of exports exceeding that of Saudi Arabia. The rise of the US as the largest producer and a significant exporter of crude meant that the US could replace Saudi Arabia as a swing producer that responds quickly to market signals. However, in 2022, when oil prices were close to US$100/b, financial and geological difficulties faced by producers limited the US response. LTO production usually peaks a month after the start of production, but declines fast afterwards to modest and roughly flat production in three years.
Oil production decisions by Saudi Arabia and Russia do not reflect optimism over demand growth. The IEA (International Energy Agency) expects oil demand to peak by 2030 in one of its scenarios. Rising sales of EVs (electric vehicles), especially in China and improvements in fuel efficiency in Internal Combustion Engines (ICEs) () are expected to substantially reduce oil demand in transportation. Breakeven prices for oil producers in the Permian Basin are between US$61/barrel (b) and US$62/b to remain profitable when debt servicing and dividend payments are included. If the EIA prediction of oil price at less than US$60/b in 2026 materialises, many US oil producers are expected to struggle to turn a profit, especially in some of the country’s aging basins, forcing them to stop drilling potentially idle drilling rigs, and let employees go. If US producers respond to the “drill baby drill” call, they will only worsen the situation.
The fear that Saudi Arabia, one of the world’s lowest-cost producers, could increase market share by pumping more oil and allowing prices to go lower, forcing other producers out of business, has a low probability of occurring.
In 2023, crude oil production in Saudi Arabia declined by about 900,000 b/d because of OPEC+ plus [other exporters]. production cuts and further voluntary cuts Saudi Arabia made to offset weaker demand growth. Saudi Arabia has also scrapped plans to increase production capacity to 13.0 million b/d by 2027. Russia was among the OPEC+ countries that announced production cuts in 2022 and 2023 in addition to voluntary cuts of 500,000 b/d. Although these cuts have reduced recent production in Russia, sanctions and voluntary actions by oil companies in response to the conflict over Ukraine have been the primary cause of production cuts in Russia.
The fear that Saudi Arabia, one of the world’s lowest-cost producers, could increase market share by pumping more oil and allowing prices to go lower, forcing other producers out of business, has a low probability of occurring. But cheap oil could potentially reduce the competitiveness of EVs, which is not what the EV industry is looking for at the moment. Loss of US production may add to the volatility in oil prices in the near term, which will erode the terms of trade for oil-importing countries in the Global South. If Saudi Arabia and Russia make production decisions for reasons other than market fundamentals, it could inflate or increase the volatility of oil prices to the detriment of the Global South, where oil demand continues to grow.
Source: Statistical Review of World Energy 2024
Lydia Powell is a Distinguished Fellow at the Observer Research Foundation.
Akhilesh Sati is a Program Manager at the Observer Research Foundation.
Vinod Kumar Tomar is a Assistant Manager at the Observer Research Foundation.
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Ms Powell has been with the ORF Centre for Resources Management for over eight years working on policy issues in Energy and Climate Change. Her ...
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Akhilesh Sati is a Programme Manager working under ORFs Energy Initiative for more than fifteen years. With Statistics as academic background his core area of ...
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Vinod Kumar, Assistant Manager, Energy and Climate Change Content Development of the Energy News Monitor Energy and Climate Change. Member of the Energy News Monitor production ...
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