Energy Prospectus

The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 6.299 million barrels in the week ended June 30. Market analysts' had expected a crude-stock draw of 2.283 million barrels, while the American Petroleum Institute late Wednesday reported a supply draw of 5.674 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, decreased by 1.334 million barrels last week, the EIA said. Total U.S. crude oil inventories stood at 502.9 million barrels as of last week, according to press release, which the EIA considered to be “in the upper half of the average range for this time of year”.

The report also showed that gasoline inventories decreased by 3.669 million barrels, compared to expectations for a draw of 1.067 million barrels, while distillate stockpiles fell by 1.850 million barrels, compared to forecasts for an increase of 0.217 million.
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Keep in mind that the weekly storage reports right before and right after major holidays are often a bit strange.

The 7/6/2017 EIA report also shows that U.S. oil production was approximately 9,338,000 barrels per day during the week ending 6/30/2017. This is an increase of 88,000 BOPD for the week, but it is just a rebound from the 100,000 BOPD drop in production that they reported the week before (for the week ending 6/23/2017).

Tropical storm Cindy caused a lot of GOM production to be shut in during the week ending 6/23, so a rebound was expected.

EIA's reported crude oil production on a weekly basis is a pure "WAG" (wild ass guess) because they have no way of knowing the actual production from the more than a million oil & gas wells in the U.S. Therefore, it is best to look at the six week running average, which I do. The six week moving average confirms that production growth in the U.S. has slowed to a crawl.
> On 3/31/2017 the six week average was growth of 33,000 BOPD per week.
> On 6/30/2017 the six week average was growth of just 3,000 BOPD per week. During the last eight weeks, EIA has reported three weekly declines in U.S. production.

The big surge in U.S. production we saw in the first quarter (429,000 BOPD) was the result of a big push to complete the best DUC wells in the 4th quarter. During the second quarter, U.S. crude oil production has only increased 139,000 BOPD with most of that growth coming in April. It is clear that the rate of growth has slowed to almost nothing. For example, EIA reported U.S. oil production of 9,942,000 BOPD for the week ending 5/26/2017 and 9,338,000 BOPD for the week ending 6/30/2017.

It appears that evidence is building that the U.S. oil production may not be able to increase as rapidly as many analysts believed it would.

Both EIA and IEA are assuming that U.S. oil production will reach 10,000,000 BOPD in early 2018 and just keep growing. What will Wall Street analysts say if it flattens out below 9,500,000 BOPD? Definitely worth keeping an eye on this.