21 Jun

US Crude Oil Production Is Steady at Record Levels

WRITTEN BY Gordon Kristopher

Weekly US crude oil production 

The EIA (U.S. Energy Information Administration) released its weekly US crude oil output data on June 20. The EIA reported that the US crude oil output was steady at 10,900,000 bpd (barrels per day) on June 8–15. Crude oil production has been steady at a record high level. The US crude oil output increased by 1,550,000 bpd or ~16.6% year-over-year.

Active WTI crude oil prices have dropped ~8.3% since May 21 partly due to record US crude oil output. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has fallen 4% since May 21. XOP seeks to follow the performance of the S&P Oil & Gas Exploration & Production Select Industry Index.

Halcon Resources (HK), Tellurian (TELL), Ring Energy (REI), and Callon Petroleum (CPE) have fallen 27.5%, 24.2%, 23.1%, and 22.5%, respectively, since May 21. These stocks were among the top percentage losses in XOP’s portfolio during this period. These stocks account for 3.5% of XOP’s holdings.

US Crude Oil Production Is Steady at Record Levels

US crude oil production recovery  

The US crude oil output dropped to 8,428,000 bpd for the week ending July 1, 2016—the lowest level in more than two years. Since then, US crude oil production has increased by 2,472,000 bpd or 29.3%. Higher crude oil prices mainly led to the rise in the US crude oil output. Active WTI oil futures have increased 153% since February 11, 2016. 

US crude oil production estimates 

The EIA estimates that US crude oil production could average 10,790,000 bpd in 2018 and 11,760,000 bpd in 2019. Production would hit the highest annual averages in 2018 and 2019 if these projections are achieved.

Supply cuts and US oil output  

US oil production is expected to rise 21.8% by 1,930,000 bpd from January 2017 to December 2018. If the output increases at that rate, it could offset more than 100% of the current self-imposed supply cuts by major oil producers. 

Impact 

Record US crude oil production could pressure oil prices. OPEC’s meeting is scheduled to be held on June 22. A large increase in OPEC and Russia’s output by easing the supply cuts could pressure oil prices. Barclays expects that major oil producers could gradually increase crude oil supplies by 1,000,000 bpd by next year. 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 production outages exceeding supply growth from the US could help oil prices.

Next, we’ll discuss US crude oil exports.

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