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Why US Crude Oil Production Levels Are Key for Global Oil Market

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US crude oil production

The EIA (U.S. Energy Information Administration) reported that the weekly US crude oil production fell by 14,000 bpd (barrels per day) to nine MMbpd (million barrels per day) for the week ending April 1, 2016, compared to the previous week. Production is at its lowest level since November 14, 2014. The latest monthly figures show US crude oil production fell by 0.6% to 9.2 MMbpd (million barrels per day) in January 2016 compared to the previous month.

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Why US crude oil production fell

The US crude oil output fell by almost 7.2% from the peak level of 9.7 MMbpd. The monthly US crude oil production peaked at 9.7 MMbpd in April 2015. US shale oil production fell due to higher break-even costs and production costs compared to oil producers in the Middle East. Low oil prices impact US shale oil producers like Energy XXI (EXXI), Halcón Resources (HK), Goodrich Petroleum (GDP), Laredo Petroleum (LPI), Ultra Petroleum (UPL), and Whiting Petroleum (WLL). For more information on US energy companies’ financial woes, read North American Oil and Gas Producers’ Debt Rose in 2015 and Crude Oil’s Total Cost of Production Impacts Major Oil Producers.

US crude oil production estimates 

The International Energy Agency reported that the US crude oil production is expected to decline by 530,000 bpd in 2016. The EIA expects that US crude oil production could fall by 0.7 MMbpd to 8.7 MMbpd in 2016 compared to 2015. The expectation of slowing US crude oil production benefits oil prices. Middle East oil producers want US shale oil producers to cut down on production, which will help Middle East oil producers to increase market share and revenues.

The crude oil market affects ETFs and ETNs like the Direxion Daily Energy Bear 3x (ERY), the PowerShares DWA Energy Momentum (PXI), the DB Crude Oil Double Short ETN (DTO), the United States Brent Oil (BNO), and the United States 12 Month Oil (USL).

Read more about the US crude oil rig count in the next part of the series.

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