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How Did US Crude Oil Production Support Crude Oil Prices?

Decoding the US Crude Oil Inventory Report: Prices Hit 2016 Highs

(Continued from Prior Part)

US crude oil production

The EIA (U.S. Energy Information Administration) reported that the US crude oil production fell by 15,000 bpd (barrels per day) to 8.95 MMbpd (million barrels per day) between April 15 and April 22, 2016. US crude oil production fell for the 13th consecutive week. The fall in US crude oil production boosted crude oil prices on April 27, 2016. To learn more about crude oil prices, read the first part of this series. This production level is 4.7% less than the same period in 2015. Crude oil production fell in the lower 48 states of the US by 15,000 bpd to 8.43 MMbpd between April 15 and April 22, 2016. For the same period, the crude oil production in Alaska was flat at 0.51 MMbpd.

US crude oil production’s peak and lows

The monthly US crude oil production peaked at 9.7 MMbpd in April 2015. On the other hand, US crude oil production hit a 19-month low in the week ending April 22, 2016. The weekly US crude oil production has fallen by 7.5% from the peak level of 9.7 MMbpd. The US crude oil production has fallen due to lower crude oil prices. Crude oil prices fell due to oversupply. Multiyear low oil prices impact US shale oil producers like Laredo Petroleum (LPI), Denbury Resources (DNR), and Synergy Resources (SYRG). They have higher break-even costs and production costs compared to oil producers in the Middle East and Russia. For more information on US energy companies’ financial woes, read North American Oil and Gas Producers’ Debt Rose in 2015 and Crude Oil’s Total Cost of Production Impacts Major Oil Producers.

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US crude oil imports and refinery demand

US crude oil imports fell by 637,000 bpd to 7.5 MMbpd for the week ending April 22, 2016—compared to the previous week. The US crude oil refinery demand fell by 257,000 bpd to 15.8 MMbpd for the same period. The US crude oil refinery demand is 2% less than the same period in 2015. The fall in the refinery demand adds to the crude oil inventory. For more about the US crude oil inventory, read the previous part of this series.

US crude oil production estimates and impact

The EIA forecast that the US crude oil output could fall by 0.83 MMbpd to 8.6 MMbpd in 2016—compared to 2015. The EIA expects it to fall to 8 MMbpd in 2017. The expectation of slowing US crude oil production could support crude oil prices and oil producers like Northern Oil & Gas (NOG) and Triangle Petroleum (TPLM).

The ups and downs in crude oil prices impact ETFs and ETNs like the PowerShares DWA Energy Momentum Portfolio (PXI), the iShares U.S. Oil Equipment & Services ETF (IEZ), and the United States 12 Month Oil Fund (USL).

In the next part of this series, we’ll cover gasoline prices.

Continue to Next Part

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