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US Crude Oil Production Is near 1970 High

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Crude oil production

On January 31, 2018, the EIA reported that US crude oil production increased by 384,000 bpd to 10,038,000 bpd in November 2017—compared to the previous month. Production increased 4% month-over-month and by 1,169,000 bpd or 13.2% from a year ago. US oil prices declined 1% last week partly due to news of near-record production.

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Monthly US crude oil production

Monthly US crude oil production tested a record high of 10,040,000 bpd in November 1970. US crude oil production has doubled in the last ten years. Production hit a low of ~5,000,000 bpd in 2007.

Improved drilling technology and production costs have been driving US crude oil production.

Impact of oil prices on ETFs and stocks

US oil prices are fell 0.5% on February 2, 2018. Lower oil prices have a negative impact on oil producers like Laredo Petroleum (LPI), Denbury Resources (DNR), and Gastar Exploration (GST). These stocks fell more than 7% on February 2, 2018.

Moves in oil prices also impact the iShares Global Energy ETF (IXC) and the Fidelity MSCI Energy Index ETF (FENY). IXC and FENY fell 3.6% and 4.2%, respectively on February 2, 2018.

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Estimates for 2018

US crude oil production could hit a record high of 10,200,000 bpd in 2018, which would be the highest annual production average ever.

Output cuts and US oil production

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

Impact

US crude oil production could be the biggest bearish driver for oil prices in 2018. Non-OPEC production could rise by 1,200,000 bpd in 2018, which could also pressure oil prices.

Next, we’ll discuss Cushing inventories.

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