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US Production Is Rising despite Lower Crude Oil Prices

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US crude oil output

The EIA (U.S. Energy Information Administration) published that the crude oil output rose by 52,000 bpd (barrels per day) to 9.465 MMbpd (million barrels per day) for the week ending July 31, 2015. In contrast, crude oil production fell by 145,000 barrels to 9.413 MMbpd for the week ending July 24, 2015. The current production is 12% above the weekly production for the same period last year. It’s 8.453 MMbpd. The US benchmark crude oil production rose for the fifth time in the last ten weeks.

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Why did crude oil production rise?

The latest available monthly US crude oil output was at 9.511 MMbpd in May 2015. Over the same period last year, the US crude oil monthly production was at 7.303 MMbpd. Crude oil production from the US is at the highest level since the 1970s. The availability of cheaper credit, technological advancement, and high crude oil prices after 2009 supported the record rise in US and Canadian oil production.

However, crude oil prices have fallen almost 30% since the peak of May 2015. Despite the carnage in the oil market, US oil production continued its record production. The key factor would be to increase its share in the oil market, reduce the crude oil imports from the Middle East, and offset the lower crude oil prices by producing more crude oil. Lower crude oil prices impact oil producers’ margins like Marathon Petroleum (MRO), Hess (HES), and Noble Energy (NBL). They account for 3.64% of the Energy Select Sector SPDR ETF (XLE). These companies’ crude oil production mix is greater than 35% of their total production.

The falling US crude oil prices also affect energy ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

The EIA estimates that US crude oil production would average 9.5 MMbpd in 2015 and 9.3 MMbpd in 2016. This seems to be a conservative forecast considering the recent rise in crude oil rigs.

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