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Gasoline Demand and Crude Oil Inventories Drive Oil Futures

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1 2 3 4 5
Part 3
Gasoline Demand and Crude Oil Inventories Drive Oil Futures PART 3 OF 5

US Crude Oil Production Reached a 2-Year High

US crude oil production 

The EIA (U.S. Energy Information Administration) estimates that US crude oil production rose by 20,000 bpd (barrels per day) or 0.2% to 9,430,000 bpd on July 21–28, 2017. Production is at a two-year high. US crude oil production rose by 970,000 bpd or 11.5% compared to the same period in 2016.

The rise in US production pressured crude oil (IXC) (SCO) (IYE) prices in 2017. Prices have fallen 13.5% year-to-date. Lower crude oil prices have a negative impact on oil and gas producers like Oasis Petroleum (OAS), Warren Resources (WRES), and Carrizo Oil & Gas (CRZO).

US Crude Oil Production Reached a 2-Year High

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US production rose to a two-year high

US crude oil production rose to a two-year high due to the following:

  • US crude oil prices rose in 2H16 and early 2017.
  • US crude oil rigs have risen 142% from the lows in May 2016.
  • Efficiency and technological advancement have improved.
  • US crude oil exports rose.
  • There have been large investments in US oil and gas projects in the last 18 months.

US crude oil production estimates  

The EIA estimates that US crude oil production could average 9.3 MMbpd and 9.9 MMbpd in 2017 and 2018, respectively. Production is expected to hit an all-time high in 2018. US production averaged 8.9 MMbpd in 2016.

Why would US production rise in 2017 and 2018?  

The above-mentioned factors would drive US crude oil production in 2017 and 2018. The following factors could also drive US production.

Impact  

US oil producers like EOG Resources (EOG), Devon Energy (DVN), Diamondback Energy (FANG), and Newfield Exploration (NFX) have raised their crude oil production target for 2017. EOG Resources and Diamondback Energy’s crude oil production rose 25% in 2Q17 compared to 1Q17.

The rise in crude oil production from the US, Brazil, Canada, and Libya in 2018 would lead to excess supplies. It could offset the production cut deal and pressure oil (USO) (UCO) prices.

In the next part of this series, we’ll look at US gasoline inventories.

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