US Crude Oil Production: Has the Slowdown Started?


Jan. 15 2019, Updated 8:47 a.m. ET

Oil rig count

Last week, the oil rig count fell by four to 873. The rig count tends to follow US crude oil prices with a three to six-month lag.

In February 2016, US crude oil prices fell to the lowest closing level in 12 years. Between February 11, 2016, and January 14, 2019, US crude oil active futures rose 92.7%. The oil rig count reached a 6.5-year low of 316 in May 2016. Between May 27, 2016, and January 11, 2019, the oil rig count rose ~176.3%. Between May 27, 2016, and January 4, 2018, US crude oil production rose ~33.9%.

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The oil rig count topped?

On October 3, US crude oil active futures settled at $76.41 per barrel—the highest closing level since November 21, 2014. Based on the pattern we saw above, the oil rig count could keep rising until at least March. By the second quarter, US crude oil production growth might slow down. In the week ending November 16, the oil rig count was at 888—the highest level since March 2015. The price difference between WTI at Cushing versus Midland started on a low note in 2019.

US crude oil output

In the week ending on January 4, US crude oil production was 11.7 MMbpd (million barrels per day)—record levels. On June 1–October 26, US crude oil production was between 10.8 MMbpd and 11.2 MMbpd. Production broke that range with a rise in the oil rig count in the past few months. With a retreat in the oil rig count, the growth in US oil production might slow down.

Oilfield services stocks

Since US crude oil’s 12-year low on February 11, 2016, the VanEck Vectors Oil Services ETF (OIH) has fallen 25.4%. Schlumberger (SLB), Halliburton (HAL), Transocean (RIG), and Baker Hughes, a GE company (BHGE), have returned -40%, 5.5%, -2.2%, and -16.1%, respectively. Together, they account for ~44% of OIH’s holdings. Any slowdown in US oil drilling activities could drag these stocks.


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