US crude oil production has largest drop in 40 years in May

U.S. crude oil production dropped by 1.99 million barrels per day (b/d) in May, the largest monthly decrease since January 1980, according to the U.S. Energy Information Administration.

EIA’s Monthly Crude Oil and Natural Gas Production Report said May is the sixth straight monthly decrease in crude oil production.

Production decreased by 16.6 percent in May due to the economic impact of the COVID-19 crisis, which resulted in a drop in demand as more people stayed home, and many businesses were closed.

The benchmark West Texas Intermediate (WTI) crude oil average spot price increased to $29/b in May as production decreased. That’s up from $17/b in April.

Texas, the nation’s largest oil producer, saw production decrease 14.8 percent in May to 764,000 b/d. North Dakota saw production drop 29.1 percent to 353,000 b/d. Texas, North Dakota, New Mexico, Oklahoma, and Wyoming all experienced record monthly crude oil production decreases in May.

The May decrease surpassed the previous record drop in September 2008 when Hurricanes Gustav and Ike hit and caused production to fall by 1.03 million b/d.

EIA expects demand to increase in July, which should cause U.S. crude oil production to rise. In its July Short-Term Energy Outlook (STEO), EIA forecasts that U.S. crude oil production will average 11.6 million barrels per day (b/d) in 2020. For perspective, prior to the pandemic, U.S. crude oil production averaged 12.8 million b/d in the first two months of 2020.

Also, EIA reported that U.S. natural gas production decreased 5.9 billion cubic feet per day (Bcf/d), or 5.3%, in May. It is the second-largest monthly decrease in U.S. natural gas production on record after September 2008.