US production hits record

Crude oil and natural gas production hit a new record in June with the highest production ever in the U.S. Production of crude topped 10.7 million barrels per day with production of natural gas hitting 4 million barrels per day, according to an analysis released by the American Petroleum Institute (API). 

Highlights from the June 2018 statistical report:

U.S. petroleum demand year-to-date at its strongest since 2007.

Domestic refineries ran at their highest percent capacity utilization rate in June (96.6 percent) since 2005.

Refinery throughput hit a new record of 18 mb/d.

With the record refinery throughput, U.S. petroleum inventories held steady as an accumulation of refined product stocks more than offset the drawdown in crude oil stocks.

Solid economic and energy market fundamentals also underpinned the strongest U.S. petroleum demand since 2007, at 20.6 mb/d.

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With continued increases in drilling activity, the U.S. is poised for further production increases in natural gas and oil. Unfortunately, increasing tariffs on steel and other components that are vital to our industry’s infrastructure and operations have emerged as a key challenge. For the energy renaissance to continue, the U.S. natural gas and oil industry critically needs policies that advance energy infrastructure around the country as well as the access of U.S. energy to global markets

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What is interesting is that the world itself is peaking despite record high oil prices between 2011 and 2014...Without US shale we would have been at 200 already. 

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Yet gas prices rise higher and higher.

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This, like the strong dollar, is bad news for the Russians. 

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21 minutes ago, Joanna said:

With continued increases in drilling activity, the U.S. is poised for further production increases in natural gas and oil. Unfortunately, increasing tariffs on steel and other components that are vital to our industry’s infrastructure and operations have emerged as a key challenge. For the energy renaissance to continue, the U.S. natural gas and oil industry critically needs policies that advance energy infrastructure around the country as well as the access of U.S. energy to global markets

Only it was Obama who increased oil production, not Trump. Obama got it from 4 million a day of Bush to 9 million, and the 10.7 today was from Obama wells. 

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Just now, Meanwhile said:

Only it was Obama who increased oil production, not Trump. Obama got it from 4 million a day of Bush to 9 million, and the 10.7 today was from Obama wells. 

but the tariffs are Trump alone doing

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33 minutes ago, Cokiga Damke said:

Crude oil and natural gas production hit a new record in June with the highest production ever in the U.S. Production of crude topped 10.7 million barrels per day with production of natural gas hitting 4 million barrels per day, according to an analysis released by the American Petroleum Institute (API). 

Highlights from the June 2018 statistical report:

U.S. petroleum demand year-to-date at its strongest since 2007.

Domestic refineries ran at their highest percent capacity utilization rate in June (96.6 percent) since 2005.

Refinery throughput hit a new record of 18 mb/d.

With the record refinery throughput, U.S. petroleum inventories held steady as an accumulation of refined product stocks more than offset the drawdown in crude oil stocks.

Solid economic and energy market fundamentals also underpinned the strongest U.S. petroleum demand since 2007, at 20.6 mb/d.

So all those reports that Permian Basin is about to run our are not true?

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17 minutes ago, Stephen said:

Yet gas prices rise higher and higher.

If the retail sale price of something goes below the cost to produce it what happens to production?

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1 hour ago, 李伟王芳 said:

So all those reports that Permian Basin is about to run our are not true?

I think its going to run out of pipeline capacity, not oil or gas

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3 hours ago, PaulG said:

I think its going to run out of pipeline capacity, not oil or gas

I think both. Permian Basin could run out of oil in about seven years but is pumping so much crude that the pipelines can't handle it all.

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9 hours ago, Sefko Trafikant said:

I think both. Permian Basin could run out of oil in about seven years but is pumping so much crude that the pipelines can't handle it all.

The EIA reported oil production of 11 mbpd. Not just the Permian is growing production. 

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(edited)

On 7/23/2018 at 9:10 AM, Meanwhile said:

Only it was Obama who increased oil production, not Trump. Obama got it from 4 million a day of Bush to 9 million, and the 10.7 today was from Obama wells. 

I'm a registered Democrat, but giving Presidents all the credit for the oil supply is just straight foolish. Obama was far friendlier to O&G than people in our industry like to complain about, but Presidents always get far too much credit for the economy. The Federal Reserve's credit policy and the timing of bubbles and bursts are more important than anything a President does. 

Edited by Eric Staib
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On 7/24/2018 at 11:28 AM, Eric Staib said:

The Federal Reserve's credit policy and the timing of bubbles and bursts are more important than anything a President does. 

Jimmy Carter, with Volker, set up the basic Fed policy, and it's been essentially the same through every president since as the USA stabilized after the Nixonian engineering the economy mess. The development of sophisticated derivatives, credit swaps, etc., has outpaced the regulations, 2008 was a result, and really Bush43's Fed and treasury folks behaved the same as Obamas. The public difference being against, or for, some regulation. 

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(edited)

On 7/23/2018 at 4:09 PM, Hajga Loma DK said:

This, like the strong dollar, is bad news for the Russians. 

With oil at 70- 80 $ and LNG  without doubt being much more expensive than pipe gas I dont see any problem for Russia. Russia has budget on 40 $ oil assumption. During next decade and because of huge underinvestment after 2014  I  see rather biggesr risk of oil peaking at 140 $ than falling to 40.

Edited by Tomasz

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On 7/23/2018 at 9:46 AM, Cokiga Damke said:

Crude oil and natural gas production hit a new record in June with the highest production ever in the U.S. Production of crude topped 10.7 million barrels per day with production of natural gas hitting 4 million barrels per day, according to an analysis released by the American Petroleum Institute (API). 

Highlights from the June 2018 statistical report:

U.S. petroleum demand year-to-date at its strongest since 2007.

Domestic refineries ran at their highest percent capacity utilization rate in June (96.6 percent) since 2005.

Refinery throughput hit a new record of 18 mb/d.

With the record refinery throughput, U.S. petroleum inventories held steady as an accumulation of refined product stocks more than offset the drawdown in crude oil stocks.

Solid economic and energy market fundamentals also underpinned the strongest U.S. petroleum demand since 2007, at 20.6 mb/d.

EIA has US oil production at 11 mbpd for the last two weeks--a record for the US. But these are merely estimates. They are not at all based on reports. The monthly figures released from EIA come with months of lag but are survey based at least. Latest available data in monthly format is April. 

weekly https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=wcrfpus2&f=w

monthly https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS1&f=M

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On 7/27/2018 at 9:28 PM, Rodent said:

EIA has US oil production at 11 mbpd for the last two weeks--a record for the US. But these are merely estimates. They are not at all based on reports. The monthly figures released from EIA come with months of lag but are survey based at least. Latest available data in monthly format is April. 

weekly https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=wcrfpus2&f=w

monthly https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS1&f=M

Yes people should simply just ignore these weekly estimates. EIA reported the actual numbers for May today. Production went down to 10,44 million b/d from 10,47m in April. The weekly reports estimated the production to be 10,80m at the end of May..

A production of 11m today is by no means impossible, but it seems highly unlikely.

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On 7/23/2018 at 7:40 PM, Meanwhile said:

Only it was Obama who increased oil production, not Trump. Obama got it from 4 million a day of Bush to 9 million, and the 10.7 today was from Obama wells. 

It was Arabs who threatened USA about its printing money and USA responded by increasing oil production. Shale oil was drilled in 1980s but government decided to put tax and environmental restrictions to stop it so as to conserve for future. But now with Arabs threatening USA, USA had to either succumb or increase production. USA total oil production including NGL and ethanol is now 17 million barrels. The break up is in this way:

OIl: 10.8MBPD

NGL: 4.7MBPD

Ethanol: 1MBPD

refinery addition: 1MBPD

Total is 17.5MBPD. USA consumption is 20.8MBPD and 3.3MBPD is imports. The 3MBPD imports is from canada.

 

This is being done due to Arab threats, not because USA desired

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3 hours ago, Bhimsen Pachawry said:

Shale oil was drilled in 1980s but government decided to put tax and environmental restrictions to stop it so as to conserve for future. 

Sorry mate, you are grossly wrong here. Tax credit for tight oil and gas (under 0.1mD) reversed decline trend. Shale was not on a horizon at a time. 

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The U.S. Oil Production “Mirage”

Some of the surge in U.S. oil production this past spring might have been “a mirage.”

On July 31, the EIA released monthly data on U.S. oil production, which revealed a decline in U.S. output of 30,000 bpd in May, compared to a month earlier. The dip is a surprise, given the widespread assumption that U.S. shale production was continuing to grow at a blistering pace.

To be sure, a big reason for the decline in overall output was the 75,000-bpd decline in production from offshore Gulf of Mexico. But Texas production only rose by 20,000 bpd, a disappointing figure that likely came in far below what most analysts had expected.

Moreover, the monthly total of 10.442 million barrels per day (mb/d) for May is sharply lower than what EIA itself thought at the time. Here are the weekly estimates for U.S. oil production that the EIA put out back then:

April 6: 10.525 mb/d
April 13: 10.540 mb/d
April 20: 10.586 mb/d
April 27: 10.619 mb/d
May 4: 10.703 mb/d
May 11: 10.723 mb/d
May 18: 10.725 mb/d
May 25: 10.769 mb/d

The weekly estimates tend to be less accurate than the retrospective monthly numbers. That is not a new dynamic, and estimating on a weekly basis inherently involves a lot of guesswork, so this is not a knock on the EIA.

Yet the discrepancy is rather striking. Not only did the EIA estimate that production in April and May was much higher than it actually was, but the agency also thought production was rising quickly.

If the weekly estimates were to be believed at the time, production would have climbed from 10.525 mb/d in early April to 10.769 mb/d by the end of May, an increase of 244,000 bpd over a roughly eight-week period.

Not only was production lower than that, but it didn’t actually increase at all. The EIA’s more accurate monthly figures show a slight decline in output, falling from 10.472 mb/d in April to just 10.442 mb/d in May.

“Weekly data had shown a strong 324kb/d output rise from March to May. The revised data shows that this rise was a mirage: output actually fell 19kb/d over the period,” Paul Horsnell, head of commodities research at Standard Chartered, wrote in a note.

 

This is a rather significant development, and it has implications for more recent data releases. “It is time to deal with the statistical gorilla on the oil trading floor,” Horsnell of Standard Chartered wrote, along with analyst Emily Ashford. “We think US crude oil production has not reached the 11 million barrels per day (mb/d) shown in recent weeks in the Energy Information Administration (EIA) weekly data, and that it is significantly below 11mb/d, with growth slowing.”

That is a reasonable conclusion, given the roughly 300,000-bpd difference between the two surveys for May. The EIA has since switched its reporting for the weekly surveys by rounding off to the nearest 100,000 bpd, but data points from the last few weeks look like this:

July 6: 10.900 mb/d
July 13: 11.000 mb/d
July 20: 11.000 mb/d
July 27: 10.900 mb/d

It’s a little tricky trying to discern patterns from that data given the rounding off, but a few things jump out. First, production dipped at the end of July, a rather surprising move. Output from Alaska fell 150,000 bpd over the last two weeks, which likely explains much of the move. However, production from the Lower 48 has only increased 100,000 bpd since the week of June 22, which suggests that the Permian basin is starting to run into production constraints because of pipeline bottlenecks.

It is a little early to really get a sense of how much the Permian is slowing down. Most analysts have been assuming an overall slowdown over the next 12 months because of pipeline constraints. However, the EIA figures might suggest that the problem has already started to bite. In April, the EIA predicted in its Drilling Productivity Report that Permian production would jump by 73,000 bpd in May. But the monthly data just released finds only modest gains in Texas (+20,000 bpd) and New Mexico (+3,000 bpd).

Second, the EIA thinks output broke 11 mb/d in July, an all-time high. But judging by the overly-optimistic monthly data from April and May, perhaps the agency is also overstating July figures, which raises the possibility that production is not nearly as high as we currently think.

In the coming months, if monthly U.S. production figures continue to show output undershooting expectations, that would have global ramifications. Most analysts still are baking in strong U.S. shale growth figures into their forecasts. If that additional output fails to materialize, the oil market could end up being a lot tighter than we all expected it to be.

By Nick Cunningham of Oilprice.com

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