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Will US Crude Oil Production Fall?

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US crude oil production

The EIA (U.S. Energy Information Administration) reported that US production fell marginally by 70,000 bpd (barrels per day) to 9.395 MMbpd (million barrels per day) for the week ending August 7, 2015. US weekly production fell for the fourth time in the last four weeks. Over the same period, US production was at 8.556 MMbpd in 2014. The US crude oil output is almost 10% more than the levels last year. US production is at the highest levels since the 1970s.

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Why did US production rise?

The availability of cheaper credit facilities and technological advancement after the 2008 financial crisis led to the boom in US production. Crude oil prices traded over $100 per barrel between 2010 and 2014. This also benefited the oil boom story.

However, crude oil prices have fallen more than 60% since the mid-week of June 2014 due to oversupply concerns. The fall in US crude oil prices negatively impacts oil producers like Chevron (CVX), Apache (APA), and ConocoPhillips (COP). Together, they account 18.66% of the Energy Select Sector SPDR ETF (XLE). Oil and gas ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) are impacted by falling US crude oil prices.

In its STEO (Short-Term Energy Outlook) report, the EIA said that US production could fall in 2016. The US oil output was at 8.7 MMbpd in 2014. It’s estimated at 9.4 MMbpd in 2015. It’s expected to slow down to 9 MMbpd in 2016.

The EIA’s monthly drilling report states that US crude oil production could fall by 93,000 bpd in September 2015—compared to August 2015. US production could fall majorly from the Bakken and Eagle Ford oil producing regions. However, crude oil rig counts are expected to rise over this period.

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