US crude oil production
The EIA (U.S. Energy Information Administration) reported that US crude oil production rose by 56,000 bpd (barrels per day) to 9,088,000 bpd between February 24, 2017, and March 3, 2017. Production rose 0.6% week-over-week and 0.1% year-over-year. US crude oil production is at the highest level since February 2016. The rise in US crude oil production pressured crude oil (RYE) (DIG) (SCO) prices on March 8, 2017. The rise in US crude oil production is the biggest bearish driver for crude oil prices in 2017.
Lower crude oil prices have a negative impact on oil and gas producers’ earnings like Apache (APA), Carrizo Oil & Gas (CRZO), PDC Energy (PDCE), and Devon Energy (DVN). For more on crude oil prices, read Part 1 of this series.
Peaks and lows
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 ~7.3%.
However, the recovery in crude oil prices since early 2016 led to the rise in US crude oil drilling activity and US crude oil production in late 2016 and early 2017.
US crude oil production estimates
The EIA released its Short-Term Energy Outlook report on March 7, 2017. It estimates that US crude oil production will average 9,210,000 bpd in 2017, which is 2.5% higher than previous estimates. It also estimates that US production will rise to 9,730,000 bpd in 2018, which is 2.1% higher than previous estimates. 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:
- technological advances causing a rise in US drilling activity even at lower crude oil prices
- higher crude oil prices in 2017—compared to 2016
- implementation of President Trump’s proposed energy policies
The rise in production could pressure US crude oil (USL) (BNO) 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. If OPEC doesn’t extend major oil producers’ output cut deal, we could see more downside for crude oil prices. Read, Are Hedge Funds Reacting to the Crude Oil Market? for more on crude oil price forecasts.
In the next part of this series, we’ll take a look at US crude oil refinery input and crude oil imports.