Oil production to be sustained

In an interview with CNBC, US Deputy Secretary of Energy Dan Brouillette said the US will continue to pump oil at its current rate or even increase its output, despite weak oil prices. As of 7:51 AM Eastern Time today, US crude oil prices had fallen 2.6% and are testing their lowest closing level since January 14. The EIA inventory report, set for today, may also disappoint oil bulls. Oil prices falling because of rising supplies could drag down the S&P 500 (SPY), of which energy stocks comprise ~5.2%.

US Deputy Energy Secretary: No Output Cut in Oil Production

US oil production might be unstoppable this year

Based on the relationship between oil prices and the oil rig count, the oil rig count might bottom out this month, prompting US oil production to skyrocket in the remaining six months of this year. In the week ended May 31, US oil production hit a record of 12.4 MMbpd (million barrels per day). Improved rig efficiency due to technological advancement has made oil output higher despite the US oil rig count being at a one-year low. In its short-term energy outlook yesterday, the U.S. Energy Information Administration forecast oil production rising by 1.4 MMbpd and 0.9 MMbpd year-over-year in 2019 and 2020, respectively.

With the current production in the US, OPEC and its allies might lose their market share to US oil and gas companies. This year, OPEC and its allies cut have production by 1.2 MMbpd to stabilize oil prices, while weekly US oil production has increased by 0.7 MMbpd, ~58.3% of the output cut.

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