Lower 48 Oil Output Forecast Slips as Rig Activity Drops—WoodMac

U.S. Lower 48 oil production will decline next year as producers pare drilling plans and shed rigs, according to Wood Mackenzie analysts.

Lower 48 oil output is forecast to fall by roughly 37,000 bbl/d year-over-year in 2026 in response to lower crude prices, said Robert Clarke, vice president for upstream research at Wood Mackenzie.

WTI crude prices have dropped sharply, falling by 17% since the beginning of the year and trading at about $61/bbl on May 27. U.S. oil producers have cut capex and slashed drilling plans in response.

Wood Mackenzie expects U.S. rig activity to decline by 10% in response to lower oil prices. The U.S. oil and gas rig count fell by 10 to 566 in the week ended May 23, the lowest level since November 2021, according to Baker Hughes data.

Other analysts estimate U.S. drillers could cut as many as 100 rigs in response to the recent decline in commodity prices.

Crude prices have declined significantly since early April, driven by global tariff uncertainty, a weakening demand outlook and added volumes of OPEC supply to the market.

“We were in the camp—pre-April, pre-Liberation Day—that we were going to see a little bit of [production] growth until the early 2030s,” Clarke said at Hart Energy’s recent SUPER DUG Conference & Expo.

Growth basins offset by legacy declines

Output growth in certain basins will be offset by production declines in maturing plays, Clarke said.

These growth-oriented basins will add nearly 163,000 bbl/d of new production over 2025 levels, according to WoodMac forecasts.

The resilient Permian Basin will continue to underpin U.S. oil production growth, driven by gains in the Delaware portion of the basin.

The Midland Basin, where Exxon Mobil, ConocoPhillips, Diamondback Energy and Occidental are major producers, will also add new barrels.

Significant new production growth is also anticipated from Wyoming’s Powder River Basin and Utah’s Uinta Basin, Clarke noted. Experts say exploration of the stacked pay potential in the Powder River and Uinta basins is still in its early stages.

But those gains will be offset by a 200,000-bbl/d decline in maturing basins and conventional plays, like the Bakken, Niobrara, Eagle Ford, Midcontinent, California and fringier areas of the Permian.

The changing rig counts across these basins will begin to manifest in the coming months, Clarke said.

“It’s really a 9- to 12-month lag until you start to see that actual physical market production delta,” he said.

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Basin breakdown

Rig reductions are already well underway in oil-weighted plays, according to Baker Hughes data:

• Operators in the South Texas Eagle Ford Shale idled four rigs to lower the count to 42 in the week ending May 23, bringing the region’s rig count down by eight, year-over-year;
• Permian Basin rig count fell by three to 279, down 33 rigs year-over-year;
• Williston Basin rig count fell by two to 31, down three rigs year-over-year; and
• Oklahoma saw declines in the liquids-rich Ardmore, Arkoma and Cana Woodford plays.

Producers in U.S. gas basins are also demonstrating rare discipline amid elevated natural gas prices. Rig activity in the Haynesville held steady at 33, down from 36 a year ago.

Marcellus producers dropped one rig, while the Utica added two rigs.

While oil prices have declined, natural gas has emerged as a bright spot in most E&P portfolios. Henry Hub futures prices averaged $4.07/MMBtu over the next 12 months; the 24-month strip is $4.16/MMBtu.

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