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US Crude Oil Output Reached a New Record

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Weekly US crude oil output  

The EIA estimates that the weekly US crude oil output rose by 27,000 bpd (barrels per day) to a record high of 10,460,000 bpd on March 23–30, 2018. US crude oil production also increased by 1,261,000 bpd or ~13.7% year-over-year.

US oil prices have dropped 4.2% since January 26, 2018. Prices declined partly due to record US oil production. The United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) have declined ~3.2% and ~6.9%, respectively, since January 26, 2018. USO follows WTI oil futures, while UCO targets to provide twice the daily return of an index of WTI oil futures.

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US crude oil production recovery 

The US crude oil output hit 8,428,000 bpd on July 1, 2016—the lowest level in more than two years. US crude oil production has increased by 2,032,000 bpd or 24.1% since July 1, 2016.

Higher oil prices contributed to the higher US oil output. US oil prices have increased ~141.7% since February 11, 2016. The Vanguard Energy ETF (VDE) and the Guggenheim S&P Equal Weight Energy ETF (RYE) have risen ~32.3% and ~42.6%, respectively, since February 11, 2016. RYE follows the S&P 500 Equal Weight Energy Index, while VDE tracks 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. The production could rise to 11.27 MMbpd in 2019. Production could hit the highest annual average in 2018 and 2019.

The IEA (International Energy Agency) expects that the US could become the world’s top crude oil producer by 2023.

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Production cuts and US oil output  

The US crude oil output is expected to increase ~20% or by ~1,800,000 bpd from January 2017 to December 2018. If the production rises at this pace, it could offset ~100% of the ongoing production cuts by major oil producers.

Impact 

Record US oil production could pressure oil prices in 2018 and 2019.

Next, we’ll discuss US gasoline inventories.

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