US Projected to Cut Oil Output as Demand Drags

U.S. oil companies are expected to temporarily reduce oil output by about 2 million barrels per day as lower crude prices force companies to cut back operations, the U.S. Energy Department said on Tuesday.

“The private sector and the free market are driving those cuts,” the department said regarding projections in a U.S. Energy Information Administration, or EIA, report.

The United States, the world’s top oil and natural gas producer, pumped a record of more than 12 million barrels per day (bpd) in 2019, according to the EIA.

The EIA’s short-term energy outlook report released on Tuesday projected that U.S. oil output in the fourth quarter would average about 11.04 million bpd, down about 1.74 million bpd from the year-ago quarter. The Energy Department did not immediately respond to a query about whether the projection of a temporary 2 million bpd drop was based on this figure.

Saudi Arabia, Russia and allied oil producers will discuss stabilizing global oil markets on Thursday, but will agree to deep cuts to their crude only if the United States joins in with curbs to help prop up prices that have been hammered by the coronavirus crisis.

U.S. President Donald Trump said on Monday the Organization of the Petroleum Countries, of which Saudi Arabia is the de facto leader, had not pressed him to ask U.S. oil producers to reduce their output to support prices. Trump said he thought U.S. cuts were “happening automatically” by private companies.

Worldwide oil demand has dropped by roughly 30%, or about 30 million bpd, as the coronavirus pandemic brings the world economy to a standstill, at the same time that Saudi Arabia and Russia have been flooding markets with extra supply.

Trump has said he expects Saudi Arabia and Russia will participate in a cut of about 10 million to 15 million bpd.

U.S. Energy Secretary Dan Brouillette will participate on Friday in a virtual G20 ministerial meeting on restoring calm to global energy markets with his counterparts around the world, said Shaylyn Hynes, a department spokeswoman.