W(h)ither U.S. Crude Oil Production

People across the world have cut back sharply on travel due to the Covid-19 pandemic, working from home and cancelling vacations and other nonessential travel. Industrial activity is also off sharply. These forces are translating into an unprecedented collapse in global oil demand. The nature of the decline means that demand is unlikely to respond to the steep drop in oil prices, so supply will have to fall in tandem. The rapid increase in U.S. oil production of recent years was already looking difficult to sustain before the pandemic, as evidenced by the limited profitability of the sector. Now, U.S. producers may have to bear the brunt of the global supply adjustment needed over the near term.