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Permian Region Driving US Crude Oil Production

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Dec. 4 2020, Updated 10:42 a.m. ET

Weekly US crude oil production 

The EIA (U.S. Energy Information Administration) estimates that US crude oil output rose by 100,000 bpd (barrels per day) to 11,000,000 bpd last week, a record high. It was 1,571,000 bpd (~16.6%) higher YoY (year-over-year).

The EIA released its US crude oil output data yesterday, and active WTI crude oil prices rose 1%. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) rose 0.26%.

Ultra Petroleum (UPL), Resolute Energy (REN), HighPoint Resources (HPR), and Delek US Holdings (DK), XOP’s top percentage gainers yesterday, rose 6.8%, 2.8%, 2.5%, and 2.2%, respectively. The stocks account for 3.4% of XOP.

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Crude oil production in the Permian region 

The EIA estimates that Permian crude oil production will average 3.4 million bpd in 2018 and 3.9 million bpd in 2019. It averaged ~2.6 million bpd in 2017.

The Permian’s geology, improving technology, and operational efficiency have made it one of the more economically favorable US oil production regions. However, low pipeline takeaway capacity and trade wars could limit oil demand, US crude oil prices, and production activity.

US crude oil production estimates 

The EIA expects US crude oil output to average 10,790,000 bpd this year and 11,800,000 bpd in 2019, and US crude oil production to average 12.02 million bpd during the fourth quarter of 2019. If these projections are achieved, the United States would become the world’s largest oil producer. 

Impact 

Russia was producing 11.2 million bpd in early July, while the United States was producing 11 million bpd last week. Increased US, OPECRussian, and Saudi Arabian output and trade tariffs could pressure oil prices, while other factors could help oil prices. Next, we’ll cover US crude oil exports.

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