US Crude Oil Production Is at a 10-Month High

The EIA (U.S. Energy Information Administration) reported that US crude oil production rose by 63,000 bpd (barrels per day) to 8,978,000 bpd between January 27, 2017, and February 3, 2017. Production rose 0.7% week-over-week, but fell 2.4% year-over-year. US crude oil production is at the highest level since April 2016. The rise in US crude oil production partially contributed to the decline in crude oil (ERY) (USL) (FENY) prices. Prices fell 4% in the last six weeks.

Lower crude oil prices have a negative impact on oil and gas producers’ earnings like Sanchez Energy (SN), Goodrich Petroleum (GDP), Continental Resources (CLR), Devon Energy (DVN), and Apache (APA). For more on crude oil prices, read Part 1 of this series.

US crude oil production peaked at 9,600,000 bpd in June 2015. In contrast, it hit a low of 8,428,000 bpd for the week ending July 1, 2016—the lowest level since June 2014. Since then, US crude oil production has risen 6.5%.

Lower crude oil prices, higher break-even costs, and higher production costs for US shale oil producers compared to other oil producers led to the fall in US crude oil production in 2016. However, the recovery in crude oil prices since early 2016 led to the rise in US drilling activity and US crude oil production in late 2016 and early 2017.

The EIA estimates that US crude oil production will average 8,980,000 bpd (barrels per day) and 9,530,000 bpd in 2017 and 2018, respectively. The EIA estimates that US crude oil production will rise to a 48-year high in 2018.

US production will rise in 2017 due to the following:

• higher crude oil prices in 2017
• technological advances causing a rise in US drilling activity even at lower crude oil prices
• implementation of President Trump’s proposed energy policies

The rise in production could pressure US crude oil (USO) (XLE) (UCO) prices. So, the US could be the main producer to offset the fall in crude oil supply from major oil producers’ output cut deal.

In the next part of this series, we’ll take a look at US crude oil refinery input and crude oil imports.