Link here.
After hitting a record crude oil production of 11 million bbls/day a few weeks ago, I had not really paid much attention to recent data.
A reader noted that during the past two consecutive weeks, US crude oil production has dropped. It's a bit irritating that the EIA starting rounding this data a few months ago, but it is what it. After hitting 11 million bopd, US crude oil production dropped by 100,000 bopd the next week (to 10.9 million bbls) and then dropped another 100,000 bodp in the most recent reporting period to 10.8 million bbls.
See this graph.
My first thought: the drop in production, one could argue, mirrors or reflects gasoline demand in the US. Crude oil exports are still too small to greatly affect weekly changes. As noted last week, US gasoline demand has been trailing demand one year ago -- which certainly seems surprising considering the perceived strength of the US economy and the US GDP growth and unemployment rates. But US gasoline demand has been down compared to a year ago, and US production may reflect that.
US gasoline demand, posted last week:
One would like to suggest the fact that US production is down is proof that the loss of oil from Canada, Libya, and Venezuela does not matter. Perhaps in a convoluted way it does, but the "kinds" of oil are different (Canada, Venezuela, heavy; US, light) and the fact that US production is down is probably not related to world supply.
For the past several weeks, the #1 story coming out of the US oil patch is the Permian takeaway story: and that story is pretty "bad." I assume about a month ago, publicly traded companies starting putting together their quarterly reports together. A number of Permian operators are cutting back. Most notable, to me, was the announcement that COP was "existing" the Permian for the time being, and that during the earnings call seemed to have to explain why why still had rigs there (to keep their leases).
See
this post on Noble and its challenges in the Permian; will shift well completions from the Permian Basin to their other oil assets , August 6, 2018.
Same link: same with EOG.
COP temporarily exits the Permian; will focus on the Eagle Ford/Bakken, Juy 5, 2018.
See Oasis here.
COP earnings transcript, July 27, 2018.
Bottom line: all that to say this -- the drop in US crude oil production probably reflects the reality of takeaway capacity in the Permian, and how operators there are responding. I assume after August 15, 2018, when the NDIC reports monthly production, we may see some stories on production coming out of the various shale pales in the US.
