Lower prices expected to slow drilling and reduce future oil production
U.S. crude oil production is expected to remain near record levels in 2026 before declining in 2027, according to the January 2026 Short Term Energy Outlook. If this forecast holds, it will mark the first annual decline in US crude oil output since 2021.
Production reached a record average of 13.6 million barrels per day in 2025. Output is forecast to stay close to that level in 2026 before falling by about two percent to 13.3 million barrels per day in 2027. The expected decline is largely due to lower crude oil prices reducing incentives for drilling, especially in onshore regions.
Small production increases in the Gulf of America and Alaska are expected over the next two years. However, these gains are forecast to be offset by declining output in the Lower 48 states. While drilling productivity has improved in recent years, the slowdown in drilling activity is expected to outweigh those efficiency gains.
The Permian Basin in western Texas and southeastern New Mexico remains the largest contributor to U.S. crude oil production. In 2025, the region accounted for nearly half of the total national output. Despite its importance, production in the Permian is forecast to remain mostly flat in 2026 and then decline slightly in 2027 as drilling activity slows.
Oil prices play a key role in shaping production decisions. The West Texas Intermediate crude oil price is forecast to decline from an average of 65 dollars per barrel in 2025 to $52 per barrel in 2026 and $50 per barrel in 2027. These levels are below reported breakeven prices for major Permian production areas, making new drilling less attractive.
In contrast, crude oil production in the Gulf of America is forecast to increase in 2026 as new projects offset natural declines from existing fields. Production in Alaska is also expected to rise through 2027 due to new development projects, marking the state’s first sustained production growth in several years.
Overall, lower prices are expected to limit future U.S. crude oil growth despite regional gains in offshore and Alaska production.
Photo Credit: EIA – Monthly U.S. curde oil productio by region (Jan 2017 – Dec 2027) STE forecast. (Million barrels per day.)