Is OPEC Underestimating US Crude Oil Production?

Weekly US crude oil production 

US crude oil production rose by 25,000 bpd (barrels per day) or 0.3% to 9,707,000 bpd on November 24–December 1, 2017, according to the EIA. It’s the highest level ever.

Production rose for the seventh straight week. US oil (UWT) (DWT) (DBO) prices fell on December 6, 2017, partially due to the rise in US oil production. Production rose by 1,010,000 bpd or 11.6% year-over-year.

Is OPEC Underestimating US Crude Oil Production?

US oil (USL) (SCO) prices fell ~5% due to the highest US production in nearly two weeks. The prices have been weighing on Brent oil (BNO) prices too. Lower energy prices have a negative impact on oil and gas producers’ (FXN) (IYE) earnings like ConocoPhillips (COP), PDC Energy (PDCE), Marathon Oil (MRO), and Sanchez Energy (SN).

US crude oil production estimates 

US production could average ~10 MMbpd (million barrels per day) in 2018, according to the EIA. Production could surpass 9.9 MMbpd by December 2017, according to Rystad Energy.

Higher oil (OIL) (DTO) prices, improving drilling costs, and US shale producers’ (XOP) (IXC) technological advancement could support US oil production.

Production cuts and US crude oil production 

Major oil producers decided to extend the production cuts until December 2018. US oil production has risen by 761,000 bpd or 8.5% from January 2017 to December 1, 2017. It has offset ~40% of the production cuts.

Impact 

US production could offset ~1,000,000 bpd or ~55% of the current production cuts in 2018. OPEC and Russia could lose their market share due to the rise in exports from the US. It suggests that OPEC has underestimated the recovery in US oil production. All of these factors could pressure oil (USO) (UCO) prices in 2018.

Next, we’ll discuss how US gasoline inventories are adding more pain to oil prices.