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US Oil Production and Gasoline Inventories Pressure Oil Futures

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Part 3
US Oil Production and Gasoline Inventories Pressure Oil Futures PART 3 OF 7

US Crude Oil Production Hit a 20-Month High

US crude oil production 

The EIA (U.S. Energy Information Administration) reported that US crude oil production rose by 17,000 bpd (barrels per day) to 9,252,000 bpd on April 7–14, 2017. Production rose 0.2% week-over-week and 3.3% year-over-year. US crude oil production is at the highest level since August 21, 2015. The rise in US crude oil production is bearish for crude oil (UCO) (RYE) (VDE) prices.

Lower crude oil prices have a negative impact on oil and gas producers’ earnings like Devon Energy (DVN), Continental Resources (CLR), Sanchez Energy (SN), and Denbury Resources (DNR). For more on crude oil prices, read Part 1 of this series.

US Crude Oil Production Hit a 20-Month High

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Peaks and lows 

US crude oil production peaked at 9,600,000 bpd in June 2015. On the other hand, it hit a low of 8,428,000 bpd for the week ending July 1, 2016—the lowest level since June 2014. Since then, US crude oil production has risen ~10%.

Lower crude oil prices, higher break-even costs, and higher production costs for US shale oil producers compared to other oil producers led to the fall in US crude oil output in 2016.

However, the recovery in crude oil prices since early 2016 led to the rise in US crude oil drilling activity and US crude oil output in late 2016 and early 2017.

US crude oil production estimates  

The EIA estimates that US crude oil production will average 9,220,000 bpd and 9,900,000 bpd in 2017 and 2018, respectively. US production will likely hit a 48-year high in 2018. US crude oil production averaged 8,880,000 bpd in 2016.

US production could rise in 2017 due to the following factors:

The rise in production could pressure US crude oil (XLE) (XOP) prices. The US might be the main producer to offset the fall in the crude oil supply from major oil producers’ output cut deal.

Tyche Capital Advisors thinks that if US production rose at the current pace, it would offset the reduction in supply from major oil producers’ output deal.

In the next part of this series, we’ll take a look at US crude oil refinery demand and crude oil imports.

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