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Crude Oil Rally Short-Lived: Fundamentals Still Feeding the Bears

PART:
1 2 3 4 5 6 7
Part 4
Crude Oil Rally Short-Lived: Fundamentals Still Feeding the Bears PART 4 OF 7

US Crude Oil Production: Crucial for the Global Crude Oil Market

US crude oil production 

On January 12, 2016, the EIA (U.S. Energy Information Administration) published its monthly STEO (Short-Term Energy Outlook) report. The government agency reported that US crude oil production came in at 9.4 MMbpd (million barrels per day) in 2015. US crude oil production could slow down to 8.7 MMbpd in 2016 and 8.5 MMbpd in 2017 due to lower crude oil prices and higher break-even costs and production costs. For more on the financial woes of US energy companies, read US Oil and Gas Companies’ Debt Exceeds $200 Billion.

US Crude Oil Production: Crucial for the Global Crude Oil Market

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US crude oil production: weekly estimates

The EIA’s latest weekly report shows that US crude oil production rose by 8,000 bpd (barrels per day) to 9.2 MMbpd for the week ending January 8, 2016. The rise in US crude oil production also led to the rise in US crude oil inventory, as covered in the second part of this series. US crude oil production rose in the lower 48 states to 8.7 MMbpd.

The current weekly US production is 0.32% more than last year’s levels. The four-week average for US production is also more than last year’s levels. In the short term, this will be bearish for prices, but US crude oil production is expected to slow down over the long term and benefit oil prices. However, Iran’s plans to scale up production in 2016 will continue to put pressure on the oil market.

The long-term oversupply concerns will continue to put pressure on shale oil producers like Continental Resources (CLR), ExxonMobil (XOM), EOG Resources (EOG), Whiting Petroleum (WLL), Devon Energy (DVN), and Apache (APA). The volatility in the market also affects ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the iShares U.S. Oil & Gas Exploration & Production ETF (IEO), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the PowerShares DWA Energy Momentum Portfolio (PXI).

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