Energy Department slashes U.S. oil production forecast amid coronavirus

The Energy Department released revised projections Tuesday that see U.S. crude oil production dropping substantially this year and remaining at lower levels through 2021.

Why it matters: The steep downward revisions are fresh signs of how low prices and collapsing oil demand from the coronavirus pandemic are upending the oil sector.

• The latest monthly outlook comes amid negotiations between Russia, Saudi Arabia and others over a new production-cutting deal to try and stabilize global oil markets.
• The Russians and Saudis reportedly want U.S. cuts to be part of any significant agreement.

What they found: The Energy Information Administration, DOE's statistical arm, now sees U.S. production averaging 11.76 million barrels per day this year.

• That's a big change compared to the projected 2020 average of nearly 13 million barrels per day in the March edition of the forecast (which would have been an increase compared to the 2019 average).
• They also project that the decline will lead to production averaging just over 11 million barrels per day next year, which is down from the 12.66 million estimate for 2021 in last month's outlook.

The intrigue: While the U.S. market system does not feature top-down production decisions made by Russia, Saudi Arabia and some others in the OPEC+ group, DOE used the figures to argue the market is providing U.S. reductions.

• "With regards to media reports that OPEC+ will require the United States to make cuts in order to come to an agreement: The EIA report today demonstrates that there are already projected cuts of 2mpbd, without any intervention from the federal government," DOE said.
• The comments echo remarks by President Trump yesterday evening about U.S. production.

What to watch: Whether the projected reductions will be enough to satisfy Russia and Saudi Arabia, the leaders of the wider OPEC+ group, which is holding a remote meeting on Thursday.

• On Friday, G20 energy ministers will meet remotely to discuss oil markets. Energy Secretary Dan Brouillette is slated to participate.

Go deeper: How the U.S. could join a global oil deal