Record US Crude Output With Fewer Rigs Is a Productivity Story. The Merger Wave Decides How Long It Lasts

The United States produced an average of 12.9 million barrels per day of crude oil and condensate in 2023, according to the Energy Information Administration. That beat the previous US and global record of 12.3 million b/d, set by the United States in 2019, and it made the country the largest crude producer of any nation at any time for the sixth year running. By December 2023, monthly output had reached 13.3 million b/d. The EIA's analysis of the December figures is direct: production records have come despite declining drilling activity, because operators are getting more oil out of each new well.

Since first surpassing the 2019 record in August 2023, output rose another 2%, ending the year 0.3 million b/d above the November 2019 peak. The important implication is that the rig count is a weaker guide to future production than it used to be. Analysts who saw rig numbers falling in 2023 and expected production to follow were wrong. The EIA notes that no other country has reached production capacity of 13.0 million b/d. Saudi Aramco recently scrapped plans to raise its maximum sustainable capacity to that level by 2027.

Saudi and Russian production is managed through state decisions and OPEC+ agreements. The $234 billion spent on deals in 2023 was dominated by corporate mergers, which made up 82% of the total. Two transactions accounted for a large share: ExxonMobil's announced acquisition of Pioneer Natural Resources for $64.5 billion, and Chevron's announced acquisition of Hess. On one side, larger operators with contiguous acreage can drill longer laterals, share infrastructure and plan development across many years.

The productivity gains that delivered the 2023 record are easier to capture at scale. On the other side, large public companies have made capital discipline a central promise to shareholders. A more productive but less responsive US industry is a different competitor for OPEC+. For consumers, a slower supply response means price spikes may last longer.