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AMERICAS OIL: U.S. gas production poised for rebound as oil growth stalls: Kemp

AMERICAS OIL
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U.S. gas production poised for rebound as oil growth stalls: Kemp

  • Analyst John Kemp writes, “sharply diverging outlooks for U.S. oil and gas production explain why hedge fund positions at the end of February were exceptionally bullish for gas but near a record low for oil.”
  • Total crude and condensates production from the Lower 48 states excluding federal waters in the Gulf of Mexico averaged 11.2 mb/d in December 2024.
  • Lower 48 output was only marginally below the record high the previous month but had increased by less than 0.2 mb/d compared with the same month a year earlier.
  • Growth has steadily decelerated from around 1 mb/d towards the end of 2023 as the shock caused by Russia’s invasion of Ukraine in February 2022 has faded.
  • Oil drilling and production generally react to price changes with a delay of about 5 months and 12 months, respectively.
  • Unlike oil, U.S. gas production is likely to increase significantly in 2025, after prices more than doubled in real terms from the multi-decade low in Q1 2024.
  • Dry gas production declined slightly to an average of 103.2 bcf/d in 2024 from 103.6 bcf/d in 2023.
  • Falling production, combined with record consumption from gas-fired generators, growth in exports, and the coldest winter for six years, has tightened supplies sharply.
  • Surplus inventories in March 2024 inherited from the very mild winter of 2023/24 had been transformed into a large and widening deficit by February 2025.
  • So far, there has been no measurable increase in drilling, but production has been climbing steadily, likely as producers complete already-drilled holes and increase flow rates from wells in production.
  • Dry production increased to an average of 105.7 bcf/d in December 2024, the highest for 10 months, up from a low of 101.8 bcf/d in September 2024.
  • Production will have to increase significantly in 2025 to stem the unsustainable inventory depletion – the only question is how high prices have to rise to induce the necessary response and choke off some gas use by generators. 
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U.S. gas production poised for rebound as oil growth stalls: Kemp

  • Analyst John Kemp writes, “sharply diverging outlooks for U.S. oil and gas production explain why hedge fund positions at the end of February were exceptionally bullish for gas but near a record low for oil.”
  • Total crude and condensates production from the Lower 48 states excluding federal waters in the Gulf of Mexico averaged 11.2 mb/d in December 2024.
  • Lower 48 output was only marginally below the record high the previous month but had increased by less than 0.2 mb/d compared with the same month a year earlier.
  • Growth has steadily decelerated from around 1 mb/d towards the end of 2023 as the shock caused by Russia’s invasion of Ukraine in February 2022 has faded.
  • Oil drilling and production generally react to price changes with a delay of about 5 months and 12 months, respectively.
  • Unlike oil, U.S. gas production is likely to increase significantly in 2025, after prices more than doubled in real terms from the multi-decade low in Q1 2024.
  • Dry gas production declined slightly to an average of 103.2 bcf/d in 2024 from 103.6 bcf/d in 2023.
  • Falling production, combined with record consumption from gas-fired generators, growth in exports, and the coldest winter for six years, has tightened supplies sharply.
  • Surplus inventories in March 2024 inherited from the very mild winter of 2023/24 had been transformed into a large and widening deficit by February 2025.
  • So far, there has been no measurable increase in drilling, but production has been climbing steadily, likely as producers complete already-drilled holes and increase flow rates from wells in production.
  • Dry production increased to an average of 105.7 bcf/d in December 2024, the highest for 10 months, up from a low of 101.8 bcf/d in September 2024.
  • Production will have to increase significantly in 2025 to stem the unsustainable inventory depletion – the only question is how high prices have to rise to induce the necessary response and choke off some gas use by generators.