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US Crude Oil Production Sees a Significant Fall: What’s Next?

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US crude oil production 

The EIA (U.S. Energy Information Administration) released its weekly petroleum report on May 4, 2016.

The government agency reported that US crude oil production fell by 113,000 bpd (barrels per day) to 8.8 MMbpd (million barrels per day) for the week ending April 29, 2016, compared to the previous week. This is 6.4% lower than the corresponding period in 2015.

US crude oil production fell for the 14th straight week. In the lower 48 states of the United States, crude oil production fell by 30,000 bpd to 8.4 MMbpd for the week ending April 29, 2016, compared to the previous week. Crude oil production in Alaska also fell by 83,000 bpd to 0.43 MMbpd in the same period.

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US crude oil production’s peaks and lows 

Monthly US crude oil production peaked at 9.7 MMbpd in April 2015. In contrast, US crude oil production hit its lowest level since September 5, 2014, for the week ending April 29, as stated earlier.

Weekly US crude oil production has fallen by 9.3% from its peak level of 9.7 MMbpd. It’s fallen due to higher break-even costs and higher production costs compared to oil producers in the Middle East and Russia.

Lower oil prices impact oil drillers and US shale oil producers such as Laredo Petroleum (LPI), Diamond Offshore Drilling (DO), Northern Oil & Gas (NOG), Denbury Resources (DNR), and Synergy Resources (SYRG).

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 imports and refinery demand 

Weekly US crude oil refinery demand also rose by 139,000 bpd to 16 MMbpd for the week ending April 29, 2016, compared to the previous week. Meanwhile, US crude oil imports rose by 110,000 bpd to 7.7 MMbpd for the same period. This was ~16% higher than the corresponding period in 2015.

US crude oil production estimates and impact 

The EIA forecast that US crude oil output could fall by 0.83 MMbpd to 8.6 MMbpd in 2016 compared to 2015. BMI Research estimated that US crude oil production would fall over the long term. The expectation of slowing US crude oil production could support crude oil prices.

Rises and falls in crude oil prices affect ETFs and ETNs such as the PowerShares DWA Energy Momentum ETF (PXI), and the United States 12 Month Oil ETF (USL).

In the next part of this series, we’ll cover gasoline prices.

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