Is Falling US Crude Oil Production Bullish or Bearish for Prices?



Monthly US crude oil production

The EIA (U.S. Energy Information Administration) reported that monthly US crude oil production fell by 91,000 bpd (barrels per day) to 8.8 MMbpd (million barrels per day) in December 2016—compared to the previous month. Production fell 1.1% month-over-month and 4.8% year-over-year. The fall in US crude oil production could support crude oil (RYE) (IXC) (FENY) prices. For more on crude oil prices, read Part 1 of the series.

Read US Crude Oil Production: Highest Level since March 2016 for more on weekly US crude oil production.

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Peaks and lows

US crude oil production peaked at 9.6 MMbpd in April 2015. In September 2016, production hit 8.6 MMbpd—the lowest monthly level since March 2014. 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.

The fall in US crude oil production impacts oil producers’ earnings like Contango Oil & Gas (MCF), Marathon Oil (MRO), Chevron (CVX), Denbury Resources (DNR), and Cobalt International Energy (CIE).

US crude oil production estimates 

The EIA estimates that US crude oil production will average 8,980,000 bpd 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 crude oil production averaged 8,880,000 bpd in 2016.

US production could rise in 2017 due to the following factors:

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

Next, we’ll analyze Libya’s crude oil production.


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