U.S. Increased Oil Output vs. OPEC Production Cuts | Weekly News Update

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Last week crude oil production was top of mind in the media cycle. Dynamics between the US and OPEC outputs continue to fluctuate as US pushes ever higher in production and OPEC clings to its mission to reduce. The Trump administration also plans to undo the Methane-Emission Rule related to drilling operations.

 U.S. Increased Oil Output vs. OPEC Production Cuts

Several stories broke regarding the fight between U.S. increased oil output and OPEC’s production cuts as oil and diesel prices continued to drop last week.  OPEC increased their oil supply forecast from producers outside the cartel by 1.4mmbd, most of which comes from the U.S.  Similarly, WSJ reported U.S. production is ramping up faster than it did between 2011 and 2014, but with oil prices 40% lower this time.  The U.S. oil production surpassed 10 mmbd in November pushing the U.S. into second place above Saudi Arabia in crude oil production.  All of these headlines have weighed on prices of crude oil and diesel, as the national market diesel and WTI crude oil price dropped by $0.24/gallon and $6.61/barrel, respectively, in the first twelve days of February.  Looking to the future, U.S. production is projected to surpass 11 mmbd by 2019.

In response to increased oil supply news, Saudi Arabia announced they will cut an additional 0.1 mmbd in March and keep exports below 7 mmbd to stabilize the oil market.  After the announcement, crude prices rose in the following days.  After a year of strong oil demand growth in 2017, 2018 is predicted to be much closer to supply-demand balance.  Therefore, headlines of US production vs. OPEC production cuts could continue to have noticeable impacts to crude oil prices and to prices at the pump.

In Other News

2/12

WSJ: OPEC Revises Crude Supply Forecasts on Higher U.S. Production

Booming U.S. shale production forced the OPEC oil cartel to raise its crude supply forecasts for this year, but it said strengthening global demand would continue to help eat up the excess supply.

Forbes: Amazon Takes On UPS, FedEx Hints That Driverless Car Program Is Further Along Than Many Believe

Autonomous driving advocates say the technology becoming ubiquitous is a matter of when not if, pointing to the promise of safer roads, less traffic, reduced carbon emissions and lower transportation costs. This explains why tech companies, including many of Amazon’s perceived rivals, have been very aggressive, not only investing billions to perfect this technology but being rather transparent about it.

WSJ: Trump Administration Plans to Undo Methane-Emission Rule

The Trump administration said Monday that it is proposing to roll back an Obama-era climate regulation aimed at cutting emissions of methane from drilling operations on federal lands.

2/13

WSJ: Shale Output Hasn’t Grown This Fast Since Oil Was at $100

U.S. shale companies are churning out crude oil at a record pace that could overwhelm global demand and reverse the oil market’s fragile recovery.   U.S. shale production is growing faster than it did even during the boom years of $100 a barrel oil prices from 2011 to 2014.  The difference this time is oil prices are about 40% lower.

Reuters: Physical oil market sends warning to OPEC: Rout might not be over

As OPEC watches a near 15 percent drop in the oil price in three weeks, important indicators in the physical crude market are flashing signals that the decline might be far from over.

2/14

Oil Price.com: Saudi Arabia Vows to Cut More Production to Stabilize Oil Market

Saudi Arabia will cut additional 100,000 bpd of its oil production next month and keep its exports below 7 million bpd in March in a bid to help clear the global oversupply and counteract the recent oil market volatility.

2/15

Reuters: Oil gains in weekly recovery on equities rebound, weak dollar

Oil prices edged up on Friday as a rebound in the global equities market and a weak dollar supported crude’s recovery from last week’s slide.

2/16

Reuters: Speculators cut U.S. Nat gas net longs for second week in a row: CFTC

U.S. natural gas speculators cut their net long positions for a second week in a row, betting prices will decline as supplies remain adequate with output near record highs and forecasts for near seasonal weather for the rest of the winter.

WSJ: Oil Closes at One-Week High

Tug-of-war seen between OPEC’s cuts and U.S.’s ramped-up production.  Oil prices closed at a one-week high on Friday, recouping losses as optimism over the crude market rebalancing outweighed concerns about shale production.

This weekly publication is designed to highlight relevant industry news to provide professionals in the transportation, supply chain, and energy sectors with up-to-date information in a rapidly changing marketplace. This update is purely a compilation of industry news and as such, does not necessarily reflect the opinion of Breakthrough®Fuel. We do not warrant or guarantee accuracy or completeness of information. For additional information, please contact us at info@breakthroughfuel.com.

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