US crude oil production
The EIA (U.S. Energy Information Administration) reported that US crude oil production rose by 18,000 bpd (barrels per day) to 9,147,000 bpd from March 17–24, 2017. Production rose 0.2% week-over-week and 1.4% year-over-year. US crude oil production is at the highest level since February 2016. The rise in US crude oil production is the biggest bearish driver for crude oil (FENY) (FXN) (SCO) prices in 2017.
Lower crude oil prices have a negative impact on oil and gas producers’ earnings like Chevron (CVX), Apache (APA), Denbury Resources (DNR), Devon Energy (DVN), and Cobalt International Energy (CIE). 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 had 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 ~8%.
US crude oil production estimates
The EIA estimates that US crude oil production will average 9,210,000 bpd and 9,730,000 bpd in 2017 and 2018, respectively. The EIA estimates that US crude oil production will rise to a 48-year high in 2018. Barclays Bank estimates that US crude oil production could hit a high from the 1970s in the coming years. 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 (USO) (UCO) prices. The US might 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 Russia’s Central Bank: Crude Oil Prices Could Hit $40 per Barrel 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.