Drilling can recover if price remains at $30 per barrel

U.S. oil production is expected to reach its low point next month before beginning a slow recovery that could take until late 2021 to reach pre-pandemic levels, according to a forecast released Tuesday.

The forecast, by Norwegian energy research firm Rystad Energy, says producers are expected to pump a low of 10.7 million barrels per day in June, down 17 percent from 12.9 million barrels during March.

Oil companies halted or reduced production at existing wells or scaled back drilling and completion activities as the coronavirus pandemic crushed global demand for oil.

If oil prices remain at $30 per barrel oil this year, Rystad says, domestic pro

duction would recover slightly in the fall and end the year at 11.1 million barrels per day in December.

If oil rises to $39 a barrel by the end of 2021, the production rate will hit 11.7 million barrels per day. U.S. oil settled Tuesday at $34.35.

Any potential recovery won’t be evenly distributed across the U.S. The Permian Basin of West Texas, offshore Gulf of Mexico and Alaska are expected to benefit most, Rystad Energy said.

“Even in the Permian Basin, we might need to wait until 2022 or a better oil price, before the basin can again achieve its first quarter 2020 production record of close to 5 million barrels per day,” Rystad Energy’s Head of Shale Research Artem Abramov said.

Meanwhile, in China, where the coronavirus pandemic began, demand is picking up after its government began to relax social distancing measures.

Chinese oil demand is expected to average 13 million barrels a day from the beginning of April to the end of June, a 16 percent increase over the first three months of the year, research firm Wood Mackenzie said Tuesday.

The rebound marks a promising sign for an oil industry that has been ravaged by an estimated 30 percent decline in global fuel demand, at one point causing the U.S. benchmark West Texas Intermediate to trade at a negative price for the first time in history.