US crude oil production
The EIA (U.S. Energy Information Administration) estimates that US crude oil production remained flat at ~9.1 MMbpd (million barrels per day) in the week ended October 23, 2015, compared to the week ended October 16. This level is ~1.6% higher than last year’s level of ~8.9 MMbpd.
What does this mean?
The four-week average production of 9.1 MMbpd through the week ended October 23 was ~2% higher than the corresponding period last year at ~8.9 MMbpd. The four-week average was flat week-over-week.
As you can see in the graph above, the four-week average production has been on a downtrend and has stayed flat recently. This suggests that the US shale-induced crude oil production boom is easing as a result of falling prices.
Lower production, meaning lower supply, should be bullish for WTI (West Texas Intermediate) crude oil prices (USO). Higher WTI prices are positive for crude oil producers like Hess (HES), ConocoPhillips (COP), and EP Energy (EPE).Hess and ConocoPhillips are part of the Vanguard Energy ETF (VDE). Together, they account for ~6% of the fund. The flat production data could also be another driver for Wednesday’s crude oil price rise. Prices had jumped by 6.3% on Wednesday, October 28.
However, MLPs such as Plains All American Pipeline (PAA) stand to lose when production falls. These companies make money by transporting energy.
US crude oil imports
Net US crude oil imports fell by 439,000 bpd (barrels per day) to average ~7.0 MMbpd in the week ended October 23. The fall in imports was driven mainly by falling imports from Venezuela, Mexico, and Iraq. A fall in imports, meaning lower supplies, is bullish for WTI crude oil prices. This could be yet another driver for Wednesday’s crude oil price increase.
Imports were ~1% lower compared to last year’s levels during the same week. The four-week average of ~7.2 MMbpd through the week ended October 23 was ~3.8% lower than last year’s average. Also, it was ~1.7% lower compared to the previous four-week average through October 16.
Supply forecasts for 2015 and 2016
According to the EIA, crude oil production should average 9.2 MMbpd in 2015 and 8.9 MMbpd in 2016. The fall in 2016 is expected to be driven by weak crude oil prices.
Crude oil production averaged 8.7 MMbpd in 2014. The EIA forecasts average net crude oil imports of 6.8 MMbpd in 2015 and 7.0 MMbpd in 2016.
The EIA will release its next STEO (Short-Term Energy Outlook) on November 10.