The US Energy Information Administration predicts that in 2026, US crude oil production will average about 13.6 million barrels per day. However, this output is expected to drop by 340,000 barrels per day by 2027 due to less drilling. The production peak is estimated to be 13.89 million barrels per day in November 2025. By the end of this year, production may decrease to 13.52 million barrels per day and fall further to 13.16 million barrels per day by the end of 2024. The main reason for less drilling activity is lower oil prices. Currently, the average price for West Texas Intermediate (WTI) oil is around $52 per barrel this year and is predicted to drop to $50 per barrel next year.

Global Oil Market Dynamics

This year, the global oil market has an oversupply of about 2.8 million barrels per day due to high production levels. It’s expected that rising oil demand and falling US production will help reduce this oversupply. Forecasts indicate that this combination should lessen the oversupply next year. Currently, WTI prices are around $51.50 per barrel, indicating a significant oversupply. Soft prices are likely to continue this year, with the EIA predicting an average of $52 per barrel for 2026. These low prices could lead to a significant shift in supply dynamics. We are already noticing the effects on drilling activity, which can predict future production. Last week, the Baker Hughes rig count dropped to 498, down from a peak of over 620 rigs in late 2024. This decline shows that producers are cutting back on investments in new wells due to lower prices.

Production Outlook And Market Impact

The data suggests that the peak of US crude output is behind us, having reached a record 13.89 million barrels per day in November 2025. The forecast now indicates a slow decline to 13.16 million barrels per day by the end of next year. This production slowdown is expected to help restore balance to the global market in the next 12 to 24 months. For derivative traders, this outlook hints at a possible flattening of the crude oil futures curve. The current oversupply keeps front-month contracts low, but a tighter market anticipated in 2027 may support longer-term contracts. We might see the current contango structure narrow as the year progresses. This situation resembles the downturn we experienced in 2015-2016, where low prices led to production cuts that helped the market recover. As US output begins to drop and global demand rises steadily, the current supply glut will diminish. This suggests that short-term protection through put options could be wise, while call options on future contracts might capture the expected price recovery next year. Create your live VT Markets account and start trading now.

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