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Lower US Crude Oil Production Forecasts for 2019

Gordon Kristopher - Author

Nov. 20 2020, Updated 5:06 p.m. ET

Weekly US crude oil production  

The EIA (U.S. Energy Information Administration) released its weekly US crude oil production data on June 13. The EIA reported that US crude oil production increased by 100,000 bpd (barrels per day) to a record high of 10.9 MMbpd (million barrels per day) on June 1–8. The production increased by 1.6 MMbpd or ~16.8% from a year ago.

WTI crude oil prices have declined ~8% since May 21 partly due to record US crude oil production. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has fallen 4.7% since May 21. XOP seeks to follow the performance of the S&P Oil & Gas Exploration & Production Select Industry Index.

Callon Petroleum (CPE), Halcon Resources (HK), Ring Energy (REI), and Matador Resources (MTDR) account for 3.8% of XOP’s holdings. These stocks have fallen 25%, 22%, 21%, and 20%, respectively, since May 21. They were among the top percentage losses in XOP’s portfolio during this period.

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US crude oil production recovery 

The US crude oil output dropped to 8.4 MMbpd on July 1, 2016—the lowest level in more than two years. Since then, US crude oil production has increased by 2.5 MMbpd or 30%. Higher crude oil prices mainly led to the rise in US crude oil output. WTI oil futures have increased 154% since February 11, 2016. 

US crude oil production estimates  

The EIA released its STEO (Short-Term Energy Outlook) report on June 12. The EIA estimates that US crude oil production could average 10.79 MMbpd in 2018, which is 0.6% higher than the May estimates. The EIA also estimates that US crude oil production could average 11.76 MMbpd in 2019, which 0.8% lower than the May estimates. US crude oil production would hit the highest annual averages in 2018 and 2019 if the projections are achieved.

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Supply cuts and US oil output 

US crude oil production is estimated to rise 21.8% by 1.93 MMbpd from January 2017 to December 2018. If the output increases at that rate, it could offset more than 100% of the ongoing supply cuts by major oil producers. 

US crude oil production and oil prices  

The US crude oil output has risen for the 16th consecutive week. Record US crude oil production and expectations of higher crude oil production from Saudi Arabia and Russia have been weighing on oil prices. US crude oil prices have declined ~8% since May 21. All of these factors could pressure crude oil prices. Lower oil prices could slow down crude oil drilling and production activity in the US.

However, the possibility of new sanctions on Iran and Venezuela and supply outages exceeding supply growth from the US could support oil prices.

Next, we’ll discuss US crude oil exports.


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