Could Coronavirus Knock US off the Top for Oil Production?

The COVID-19 pandemic has wreaked havoc on the global economy and now analysts are warning the outbreak could threaten the USA's status as the world's top oil producer. The virus has now infected more than 1.5 million people around the world and sparked a massive decline in oil demand. Prices have also plummeted in the wake of an escalating price war between Russia and Saudi Arabia.

In response, American-owned oil companies have slashed budgets, put a halt on capital investments and laid off hundreds of workers. Dozens of rigs have already been shut down, with the high possibility of more closures if demand and prices continue to fall. Ultimately, energy experts predict the COVID-19 pandemic could strip the United States of its crown as the biggest oil producer in the world.

"If we continue where we are with these low prices, we’ll see a big decline in U.S. oil production. It will no longer be number one,” warns IHS Markit energy expert Dan Yergin in an interview with CNBC. "We see in this coming month of April what could be a 20 million barrel a day decline in oil demand. It’s unprecedented." If demand drops by 20 million barrel a day it could represent a fall six times bigger than the devastating downturn seen during the financial crisis of 2007/08.

Demand plummets, production slumps

The shale oil boom saw the United States emerge as the world's top oil producer, climbing past 12 million barrels per day in 2019. Now, the Energy Information Administration is predicting US crude production of around 11.76 million barrels per day in 2020, set to drop even further to 11.03 million barrels a day in 2021.

On March 30, international benchmark West Texas Intermediate fell to an 18-year low of US$20.09. Some analysts are predicting an even more dire outlook, warning that WTI could drop to as low as US$5 a barrel and even slip into negative territory if the COVID-19 pandemic continues to gain momentum.

Experts predict foreign policy overhaul

The United States losing its status as a major oil producer could have significant implications for the country, which is considered a global energy leader. Experts predict an overhaul of foreign policy, stressing that energy production and national security are intrinsically linked.

What's next for oil? According to experts at Koehler Instrument Company, uncertainty is guaranteed. find out more with 'The Only Certainty is Uncertainty for Corona-Stricken Oil Industry', which looks at how COVID-19 has affected the global energy industry so far, and what's to come.