US Crude Oil Production Hit a 16-Month High

September WTI (West Texas Intermediate) crude oil (USO) (IEZ) (XES) futures contracts fell 0.32% and were trading at $49.42 per barrel in electronic trading at 2:00 AM EST on August 7, 2017.

Prices are near a two-month high due to the expectation of improving demand. Higher crude oil (RYE) (VDE) (PXI) prices have a positive impact on oil and gas exploration and production companies such as Stone Energy (SGY), Apache (APA), Noble Energy (NBL), and PDC Energy (PDCE).

The EIA (U.S. Energy Information Administration) estimates that US crude oil production rose by 59,000 bpd (barrels per day) to 9.17 MMbpd (million barrels per day) in May 2017—compared to the previous month. Production rose by 0.65% month-over-month and by 317,000 bpd or 3.5% year-over-year.

Production rose due to the rise in production in Texas and the offshore Gulf of Mexico. US crude oil production is at the highest level since February 2016. The rise in US crude oil production is bearish for crude oil prices. US crude oil (XLE) (XOP) prices have fallen ~13% year-to-date due to the rise in US crude oil production.

Weekly US crude oil production has risen ~12% or by ~1 MMbpd to 9.43 MMbpd since June 2016. The rise in US crude oil production could offset the production cut deal.

The EIA estimates that US crude oil production could average 9.9 MMbpd in 2018. It would be the highest level ever. It could weigh on crude oil (USL) (PXI) prices. Lower crude oil prices have a negative impact on oil producers like Stone Energy (SGY) and PDC Energy (PDCE).

In the next part, we’ll look at the relationship between crude oil and the US dollar.