Weekly US crude oil production
According to the EIA, US crude oil production increased by 12,000 bpd (barrels per day) to a record high of 10,381,000 bpd from March 2–9, 2018. Production also increased by 1,272,000 bpd or ~14% from a year ago.
US oil prices have dropped 7.8% since January 26, 2018. Oil prices dropped partly due to record US oil production. The PowerShares DB Oil Fund (DBO) and the United States 12 Month Oil Fund (USL) have declined 4.7% and 5.9%, respectively, since January 26, 2018. DBO follows the performance of the DBIQ Optimum Yield Crude Oil Index Excess Return. USL follows WTI crude oil futures.
US crude oil production recovery
US crude oil production reached 8,428,000 bpd on July 1, 2016. It was the lowest level in more than two years. Production has increased by 1,953,000 bpd or 23.1% since July 1, 2016.
Higher oil prices, technological advancements, and improved drilling costs led to the rise in US oil production. US oil prices have risen 132.5% since February 11, 2016. The Vanguard Energy ETF (VDE) and the Guggenheim S&P Equal Weight Energy ETF (RYE) have risen 31.8% and 43.1%, respectively, since February 11, 2016. RYE tracks the performance of the S&P 500 Equal Weight Energy Index. VDE follows the performance of an index of energy stocks.
Estimates for 2018 and 2019
According to the EIA, US oil production could average 10.7 MMbpd (million barrels per day) in 2018 and 11.27 MMbpd in 2019. Production could hit the highest annual average in 2018 and 2019. The International Energy Agency estimates that the US could become the world’s top crude oil producer by 2023.
Supply cuts and US oil production
US oil production is expected to increase ~20.2% or by ~1,800,000 bpd from January 2017 to December 2018. If US production rises at this speed, it could offset ~100% of the supply cuts by major oil producers.
An increase in US oil production could pressure oil prices in 2018. Next, we’ll cover US gasoline inventories.