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US Crude Oil Production Achieved a New Record

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Weekly US crude oil production 

The EIA released its weekly US crude oil production data on May 2. It reported that US crude oil production increased by 33,000 bpd (barrels per day) to a record high of 10,619,000 bpd from April 20 to 27. Production also increased by 1,326,000 bpd or ~14.2% year-over-year.

June US crude oil futures rose 1% to $67.93 per barrel despite the news of record US crude oil output. We discussed the bullish drivers of crude oil in Part 1 of this series. The Energy Select Sector SPDR ETF (XLE) rose ~0.4% on May 2. XLE seeks to track the performance of the Energy Select Sector Index. Newfield Exploration (NFX), Anadarko Petroleum (APC), and Cimarex Energy (XEC) account for ~3.6% of XLE’s holdings. These stocks fell ~7.2%, 1.4%, and 1.3%, respectively, on May 2. These stocks were the top percentage losers in XLE’s portfolio on May 2.

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US crude oil production recovery  

The US crude oil output hit 8,428,000 bpd on July 1, 2016. This was the lowest level in more than two years. US crude oil production has increased by 2,191,000 bpd or ~26% since then.

Higher oil prices partly supported the rise in US oil production. US oil prices have risen ~159.2% since February 11, 2016. The  Guggenheim S&P Equal Weight Energy ETF (RYE) has risen ~59% since then. RYE aims to follow the performance of the S&P 500 Equal Weight Energy Index.

Estimates for 2018 and 2019  

The EIA estimates that US oil production could average 10.69 MMbpd (million barrels per day) in 2018 and 11.44 MMbpd in 2019. US oil production could hit its highest annual average in 2018 and 2019.

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Production cuts and US oil output  

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

Impact 

Record US crude oil production could weigh on crude oil prices in 2018 and 2019.

Next in this series, we’ll cover US gasoline inventories.

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