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US Crude Oil Production Is near a Record Level

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Monthly US crude oil production 

According to the EIA, US crude oil production increased 0.1% to 9.96 MMbpd (million barrels per day) in January 2018—compared to the previous month. Production increased by  1,139,000 bpd or 13% from a year ago.

WTI oil prices have declined ~5% since January 26, 2018. Prices declined partially due to near-record US oil production. The United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) have declined ~3.8% and ~8.1%, respectively, since January 26, 2018. USO follows WTI oil futures, while UCO aims to provide twice the daily return of an index of WTI crude oil futures.

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Crude oil production increased

Monthly US crude oil production reached a record high of ~10.1 MMbpd in November 2017. In contrast, production reached 8.5 MMbpd in September 2016—the lowest level in more than two years.

US crude oil production has increased by ~1.4 MMbpd or ~16.5% since September 2016. Technological advancements, higher oil prices, and improved drilling costs led to the rise in US oil production. WTI oil prices have increased ~140.4% since February 11, 2016. The iShares Global Energy ETF (IXC) and the Guggenheim S&P Equal Weight Energy ETF (RYE) have risen ~39% since February 11, 2016. RYE follows the S&P 500 Equal Weight Energy Index. IXC follows an index of global equities in the energy sector.

Estimates for 2018 and 2019  

US oil production could average ~10.7 MMbpd in 2018 and 11.27 MMbpd in 2019, according to the EIA. Production could hit the highest annual average in 2018 and 2019.

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Production cuts and US oil output  

US oil production is estimated to rise ~20% 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 ongoing output cuts by major oil producers.

Impact 

Record US oil production could weigh on oil prices in 2018.

Next, we’ll discuss US crude oil exports.

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