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OPEC Upgrades Non-OPEC and US Crude Oil Production

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Nov. 20 2020, Updated 3:58 p.m. ET

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.

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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.

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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. 

Impact 

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.

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