Weekly US crude oil production
On May 9, the EIA released its weekly US crude oil production data. The EIA reported that US crude oil production increased by 84,000 bpd (barrels per day) to a record high of 10,703,000 bpd on April 27–May 4. The production also increased by 1,389,000 bpd or ~15% YoY (year-over-year).
June US crude oil futures rose ~3% to $71.14 per barrel on May 9 despite the news of record US crude oil output. We discussed crude oil’s bullish drivers in Part 1. The Energy Select Sector SPDR ETF (XLE) rose ~2.0% on May 9. XLE seeks to track the performance of the Energy Select Sector Index. Cimarex Energy (XEC), Cabot Oil & Gas (COG), and Helmerich & Payne (HP) account for ~2% of XLE’s holdings. The stocks fell ~2.3%, ~1%, and 0.5%, respectively, on May 9. The stocks were the top percentage losers in XLE’s portfolio on May 9.
US crude oil production recovery
The US crude oil output fell to 8,428,000 bpd on July 1, 2016—the lowest level in more than two years. Since then, US crude oil production has increased by 2,275,000 bpd or ~27%.
Higher oil prices partly led to the rise in US crude oil production. US oil prices have increased ~171.4% since February 11, 2016. The Guggenheim S&P Equal Weight Energy ETF (RYE) has risen ~61% during the same period. RYE aims to follow the performance of the S&P 500 Equal Weight Energy Index.
Estimates for 2018 and 2019
The EIA released its Short-Term Energy Outlook report on May 8. The EIA estimates that US oil production could average 10.72 MMbpd (million barrels per day) in 2018—0.3% higher than the April estimates. The EIA also estimates that US oil production could average 11.86 MMbpd in 2019—3.6% higher than the April estimates. US crude oil production could hit its highest annual average in 2018 and 2019.
Production cuts and US oil output
The US crude oil output is expected to rise ~21% or by ~1,860,000 bpd from January 2017 to December 2018. If the output increases at this pace, it could offset ~100% of the ongoing supply cuts by major oil producers.
Record US crude oil output could weigh on crude oil prices in 2018 and 2019.
Next, we’ll discuss US gasoline inventories.