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Non-OPEC and US Crude Oil Production Could Pressure Oil Prices

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US crude oil production 

US crude oil production averaged 9.3 MMbpd (million barrels per day) in 2017, according to the EIA. US crude oil production is estimated to have averaged 9.9 MMbpd in December 2017. Production hit the highest level since 1971. US crude oil production increased 5% from 2016.

Any rise in production is bearish for oil (UCO) (UWT) prices. Moves in oil prices impact funds like the Energy Select Sector SPDR Fund (XLE), which has exposure to oil and gas companies.

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Monthly US crude oil production

Monthly US crude oil production hit a record high of 10.04 MMbpd in November 1970. On the other hand, production hit 8.5 MMbpd in September 2016—the lowest level in more than two years.

US crude oil production has increased by 1.4 MMbpd or 16.5% since September 2016. Higher oil (UWT) prices and improving drilling costs led to the rise in US crude oil production.

US crude oil (USO) prices are near a three-year high. Higher oil prices support oil producers (XOP) (IEZ) like Hess (HES), Ultra Petroleum (UPL), Stone Energy (SGY), and Bonanza Creek Energy (BCEI).

Estimates for 2018 

According to the EIA, US oil production could rise 10% to ~10.2 MMbpd in 2018 from 2017—the highest annual production average ever. US oil production could increase by 870,000 bpd in 2018, according to the IEA.

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Production cuts and US oil production

US oil output is expected to rise by 1,410,000 bpd or 16% from January 2017 to December 2018. If US crude oil production increases at this speed, it could offset 75% of the production cuts by major oil producers.

Impact

Record US crude oil production could be the biggest threat to oil prices this year. OPEC expects that non-OPEC production could rise by 1.2 MMbpd in 2018, which could also pressure oil (UWT) prices.

Next, we’ll discuss global supply outages.

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