U.S. Oil Production Growth (October Actuals)

[dan_s]

EIA has reported the first shot at "actual" production for October, 2019. I use quotes around "actual", because the actuals do continue to change for a few months. That is because upstream companies can file amended production reports several months after the original deadlines. When I worked at Hess, our original state filings were always "WAGs" and we had to amend some of them more than once.

Per EIA, actual October, 2019 crude oil production was 12,655,000 barrels per day, which is a 171,000 bpd increase from September. Each year there is a run up into the winter. In 2018, oil production increased 133,000 bpd from Sept to Oct, increased another 368,000 bpd from Oct to Nov, increased just 39,000 bpd from Nov to Dec and then growth stopped. U.S. oil production declined 369,000 bpd from December, 2018 to February, 2019. Keep in mind that we had 200 more rigs drilling for oil a year ago.

In Q3 2019 a lot of DUC wells were completed. Wells being completed exceeding new wells being drilled probably ended in October.

Q1 production declines because of weather and budget exhaustion at year-end. I think U.S. oil production peaked at around 12,900,000 bpd in November or early December, 2019 and will decline to approximately 12,500,000 by March. Production growth beyond March will depend on the oil price because without an increase in the active rig count, I don't see U.S. oil production growth this year AND I doubt that upstream companies will add new rigs until WTI is firmly over $65/bbl.

Next summer is when I expect a SIGNIFICANT tightening of the global oil market. From Q2 to Q3 there is expected to be a 1.5 million bpd increase in demand for hydrocarbon based liquid fuels. Lots of SUVs hit the road when the kids get out of school. It happen every year.