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US Oil Output Surges and Crude Oil Prices Drop

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US crude oil production

The EIA (U.S. Energy Information Administration) reported that US crude oil production increased by 20,000 bpd (barrels per day) for the week ending May 29, 2015. The US oil output was at 9.586 MMbpd (million barrels per day) for the same period.

Last week, the crude oil output rose by 304,000 to 9.566 MMbpd for the week ending May 29, 2015. The US crude oil output was at 8.460 MMbpd for the week ending June 6, 2014. The current production is more than 14% higher than the levels last year. The increase in oil output puts pressure on crude oil prices. As a result, oil prices decline.

OPEC

Last week, on June 5, 2015, OPEC (Organization of the Petroleum Exporting Countries) decided to maintain the group’s collective output target of 30 MMbpd for the next six months. The consensus of a rise in production from OPEC, Russia, and the US will impact some US shale oil producers like Continental Resources (CLR), Whiting Petroleum (WLL), and Marathon Oil (MRO). The US shale oil is estimated to be the high-cost oil producers—compared to OPEC producers.

OPEC is continuing with its massive oil production strategy in order to defend its market share. Together, OPEC’s members collectively produced 31.2 MMbpd of crude oil in May 2015. Saudi Arabia and Iraq—OPEC’s largest oil producers—produced 10.31 MMbpd and 3.66 MMbpd of crude oil, respectively, in April 2015. This is adding pressure to the oil glut market.

Energy ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Select Sector SPDR Fund ETF (XLE) also fell in yesterday’s trade—mirroring WTI’s (West Texas Intermediate) crude oil prices.

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