Based on the EIA's Drilling Productivity Report, U.S. onshore production is declining by ~100,000 bbls per day each month (1.2 million BOPD this year).
It is being somewhat offset by growing production in the Gulf of Mexico.
Production from the Gulf of Mexico is expected to continue growing, despite the current price environment. With eight projects that came online in 2015, four expected in 2016, and two more anticipated for next year, the Energy Information Administration expects U.S. offshore production to continue playing a major role in the country’s output.
Based on EIA projections, the Gulf of Mexico will average production of 1.63 MMBOPD in 2016 and 1.79 MMBOPD in 2017, with a peak of 1.91 MMBOPD in December 2017, despite low oil prices. The production numbers represent 18% of anticipated 2016 production and 21% of total forecast U.S. crude oil production in 2017.
Read: http://www.oilandgas360.com/gulf-of-mex ... dium=email
U.S. Oil Production
U.S. Oil Production
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: U.S. Oil Production
From another blog this morning:
1. US crude oil inventories reach the highest level since the late 1920s.
2. Inventories at Cushing, OK (the WTI futures settlement hub) rise to record levels.
3. US oil output is barely budging in spite of a number of producers operating at a loss or extremely thin margins.
4. And it's not just about shale: offshore oil production in the Gulf of Mexico is expected to hit a new record next year.
5. Perhaps the most striking aspect of crude oil fundamentals is what's happening with US refined products. US gasoline inventories hit another record.
Moreover, the demand for distillates (such as diesel and heating oil) is far below last year's levels.
This imbalance shows no signs of abatement any time soon. Sure, rigs are down, but so what with the above information. This oversupply issue is getting out of hand with no signs of changing. The alleged leading indicators apparently need a much longer lead time.
1. US crude oil inventories reach the highest level since the late 1920s.
2. Inventories at Cushing, OK (the WTI futures settlement hub) rise to record levels.
3. US oil output is barely budging in spite of a number of producers operating at a loss or extremely thin margins.
4. And it's not just about shale: offshore oil production in the Gulf of Mexico is expected to hit a new record next year.
5. Perhaps the most striking aspect of crude oil fundamentals is what's happening with US refined products. US gasoline inventories hit another record.
Moreover, the demand for distillates (such as diesel and heating oil) is far below last year's levels.
This imbalance shows no signs of abatement any time soon. Sure, rigs are down, but so what with the above information. This oversupply issue is getting out of hand with no signs of changing. The alleged leading indicators apparently need a much longer lead time.
Re: U.S. Oil Production
Crude oil is the "raw material" for refiners.
If you were the CEO of a refiner what would you do if (a) you thought the price of crude would be higher in the future and (b) you thought the supply of crude would be falling in the future?
Would you increase your raw material inventory now or wait until you needed it when prices are likely to be higher?
Plus, CEO's of refiners know for sure that demand for their finished goods (primarily transportation fuels) is going up this summer. Demand for hydrocarbon based fuels ALWAYS goes up in the summer. Go here and take a hard look at the chart before you answer: https://www.iea.org/oilmarketreport/omrpublic/
PS: First Quarter is the lowest demand period of the year.
If you were the CEO of a refiner what would you do if (a) you thought the price of crude would be higher in the future and (b) you thought the supply of crude would be falling in the future?
Would you increase your raw material inventory now or wait until you needed it when prices are likely to be higher?
Plus, CEO's of refiners know for sure that demand for their finished goods (primarily transportation fuels) is going up this summer. Demand for hydrocarbon based fuels ALWAYS goes up in the summer. Go here and take a hard look at the chart before you answer: https://www.iea.org/oilmarketreport/omrpublic/
PS: First Quarter is the lowest demand period of the year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: U.S. Oil Production
Ok, good chart, which also shows that demand in 3Q and 4Q 2015, and 1&2 Q 2016 was larger than previous, yet the inventory numbers still grew. I must be missing something here
Secondly, why isn't anyone placing your refinery point out there in the public eye?
Secondly, why isn't anyone placing your refinery point out there in the public eye?
Re: U.S. Oil Production
Two reasons:
> U.S. oil production continued to increase until it peaked in April, 2015 at ~9.6 million bbls per day. U.S. production is now falling and the rate of decline will accelerate. My SWAG is that U.S. crude oil production will be approximately 8.0 million bbls per day by year-end.
> Crude oil in storage is a combination of U.S. production and imports. We still import a lot of oil, 7.9 million bbls per day for the week ending 2/12/2016 and 7.7 MMBOPD for the 4 week period that ended 2/12/2016. By the end of 2016, the U.S. will be importing more oil than it produces.
Raymond James and TPH seem to see what is going on, but I can't answer why more "talking heads" don't seem to see this.
Our refineries produced 19.7 million bbls per day of liquid fuels for the week ending 2/12/2016, which is slightly below average for this time of year. Included in the raw materials to make those fuels was ~3.5 million bbls per day of NGLs. One reason demand for crude oil goes up in the summer is because "summer gasoline" is required by law to include less butane. This fact alone will increase crude oil demand by about 500,000 bbls per day starting in May. This is also a big part of why Q1 is the low point for crude oil demand.
> U.S. oil production continued to increase until it peaked in April, 2015 at ~9.6 million bbls per day. U.S. production is now falling and the rate of decline will accelerate. My SWAG is that U.S. crude oil production will be approximately 8.0 million bbls per day by year-end.
> Crude oil in storage is a combination of U.S. production and imports. We still import a lot of oil, 7.9 million bbls per day for the week ending 2/12/2016 and 7.7 MMBOPD for the 4 week period that ended 2/12/2016. By the end of 2016, the U.S. will be importing more oil than it produces.
Raymond James and TPH seem to see what is going on, but I can't answer why more "talking heads" don't seem to see this.
Our refineries produced 19.7 million bbls per day of liquid fuels for the week ending 2/12/2016, which is slightly below average for this time of year. Included in the raw materials to make those fuels was ~3.5 million bbls per day of NGLs. One reason demand for crude oil goes up in the summer is because "summer gasoline" is required by law to include less butane. This fact alone will increase crude oil demand by about 500,000 bbls per day starting in May. This is also a big part of why Q1 is the low point for crude oil demand.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: U.S. Oil Production
I got a report from RigData, which shows EIA may be overstating Texas oil production by as much as 400,000 bbls per day. They show that Texas data is not matching up with what operators are reporting to the Texas Railroad Commission and on tax reports.
"When it comes to reporting crude production (after presenting similar Texas monthly volumes for years), the Railroad Commission of Texas (TX RRC) and the US Energy Information Administration (EIA) have diverged in their representations. When viewed on a percentage basis, the spread between the two figures appears to be growing at an exponential pace annually. We know the catalyst for the divergence is recent changes to the EIA’s data collection methodology. Still, the question is “Should we believe the growing amount of overstatement (relative to the TX RRC) by the EIA for Texas is an accurate depiction of the state’s production?” As of October 2015, the gap between what the TX RRC and the EIA reported for crude oil & condensate average daily production widened to a 483 thousand barrels per day; nearly 6x wider than spread between these two figures one year ago!"
Link to full report: https://rigdata.com/rigdata-insights/bl ... -you-trust
My SWAG after reading the report is that the EIA is double counting some production. For example, what if the operators are reporting gross production and other companies are adding the same volumes into their production on non-operated wells.
I worked for Hess for 18 years. As the U.S. E&P Division controller, I had a lot of dealings with the various government agencies. Many of their agents really do not understand the industry and as a result may not ask their questions correctly or understand the answers they are given.
Regardless, I see zero chance that U.S. production is not falling much faster than what EIA has been reporting. We simply are not completing enough new wells to offset the declines of the producing wells. All wells go on decline shortly after they are completed. More than 60,000 high decline rate horizontal wells have been completed in the U.S. shale plays. The math just does not add up.
"When it comes to reporting crude production (after presenting similar Texas monthly volumes for years), the Railroad Commission of Texas (TX RRC) and the US Energy Information Administration (EIA) have diverged in their representations. When viewed on a percentage basis, the spread between the two figures appears to be growing at an exponential pace annually. We know the catalyst for the divergence is recent changes to the EIA’s data collection methodology. Still, the question is “Should we believe the growing amount of overstatement (relative to the TX RRC) by the EIA for Texas is an accurate depiction of the state’s production?” As of October 2015, the gap between what the TX RRC and the EIA reported for crude oil & condensate average daily production widened to a 483 thousand barrels per day; nearly 6x wider than spread between these two figures one year ago!"
Link to full report: https://rigdata.com/rigdata-insights/bl ... -you-trust
My SWAG after reading the report is that the EIA is double counting some production. For example, what if the operators are reporting gross production and other companies are adding the same volumes into their production on non-operated wells.
I worked for Hess for 18 years. As the U.S. E&P Division controller, I had a lot of dealings with the various government agencies. Many of their agents really do not understand the industry and as a result may not ask their questions correctly or understand the answers they are given.
Regardless, I see zero chance that U.S. production is not falling much faster than what EIA has been reporting. We simply are not completing enough new wells to offset the declines of the producing wells. All wells go on decline shortly after they are completed. More than 60,000 high decline rate horizontal wells have been completed in the U.S. shale plays. The math just does not add up.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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ddlopata084
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Re: U.S. Oil Production
Dan - how well is stripper well volume accounted for? Could the decrease in stripper well production be unaccounted for and a significant percentage of this error?
Re: U.S. Oil Production
Stripper well production is fairly steady, but many stripper wells are now cash flow negative. Operators will keep them producing at a loss for awhile, but not forever. I saw a report that said if oil stays under $40/bbl the U.S. will loose 400,000 BOPD of stripper production this year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group