US crude oil production
According to the EIA’s weekly data, US crude oil production increased by 332,000 bpd (barrels per day) to a record high of 10,251,000 bpd on January 26–February 2, 2018. Production increased by 1,273,000 bpd or 14.2% from a year ago.
US oil prices declined 9.5% last week partly due to news of record production. The United States Oil ETF (USO) fell 9% to 11.8 on February 2–9, 2018. The ProShares Ultra Bloomberg Crude Oil ETF (UCO) fell 17.5% to 22.6 during the same period. These ETFs follow crude oil futures.
OPEC’s monthly report
OPEC released its Monthly Oil Market Report on February 12, 2018. OPEC reported that US crude oil production could increase by 1,300,000 bpd in 2018, which is 13% higher than January 2018 estimates.
Non-OPEC crude oil production is expected to increase by 1,400,000 bpd in 2018, which is 22% higher than January 2018 estimates.
The rise in production from the US, Canada, Brazil, the United Kingdom, and Kazakhstan could lead to the overall rise in non-OPEC crude oil production in 2018. Oil prices have risen more than 40% since June 2017, which could also contribute to the rise in non-OPEC supplies.
Impact of oil prices on ETFs
US crude oil futures rose 0.15% to $59.29 per barrel on February 12, 2018. The iShares Global Energy ETF (IXC) and the Fidelity MSCI Energy Index ETF (FENY) rose 1.6% and 1.8%, respectively, on February 12, 2018. These ETFs have exposure in US oil and gas companies.
Output cuts and US oil production
US oil production is expected to increase 18.4% or by 1,649,000 bpd between January 2017 and December 2018. If US crude oil output rises at this pace, it could offset 90% of the production cuts by major oil producers.
Record US crude oil production in 2018 could be the biggest bearish driver for oil prices in 2018. The rise in non-OPEC production outside the US will also pressure oil prices.
Next, we’ll discuss US and Cushing inventories.