U.S. Crude Oil Production - World Oil Lightning Rod



  • Key world oil number.
  • Decline not "off a cliff.".
  • Weekly estimates flawed.
  • Projections influenced.

Oil shale's influence on U.S. production sparked a world oil price war. It affects the value of energy sector investments worldwide. It is of keen interest by U.S. and world oil market participants.

The Energy Information Agency (EIA) reported the much-watched monthly U.S. crude production number today, released four days behind schedule. The January 2016 figure came in at 9.179 million barrels per day, down 56,000 b/d from December.

Based the EIA's latest revisions, production peaked in April 2015 at just under 9.7 million barrels per day (mmbd). January's figure is 515,000 b/d lower, a decline average of 57,000 b/d per month.

The decline rate has hardly depicted production "falling off a cliff," as many have predicted. As an example of such pundits, one wrote in September that production would drop to about 8.5 mmbd by the end of the year (2015).

More recently, Andy Hall, "crude oil trading god," wrote in his March 2016 letter to investors that "The average for the past four weeks is now 863 kbpd below year ago levels," which would put production at 8.296 mmbd in February 2016, almost 900,000 b/d below the January number reported above. That analysis appears to be far off-base.

One of many reasons for the slower decline rate was an uptick in Gulf of Mexico production. In July, offshore production rose by almost 150,000 b/d as a project started many years ago came on-line.

The monthly numbers are based on a survey method that the EIA commenced in 2015. Prior to that they were based on data filings from states, some of which lagged up to a year.

EIA's weekly numbers are based on its model, which I have written is highly flawed. The graph below shows a comparison of how the monthly figures compared to the weekly figures (interpolated) since January

This article was written by

Robert Boslego profile picture
Energy futures model portfolio and market analysis from an oil expert.
Seeking Alpha Marketplace Premium Service: Boslego Risk Services.

Managing Director, Boslego Risk Services

Harvard College, Economics (Honors), BA

Undergraduate thesis: "OPEC Pricing Strategy."

Harvard Business School Case Study: "Industrialized World and Oil."

Stanford University Graduate School of Business, MBA

I founded Boslego Risk Services and became a recognized expert in the area of energy price risk management (hedging) and trading, providing oil and natural gas hedging strategies to major oil companies such as Exxon, Shell, Mobil, Chevron, Texaco and Phillips; to the national oil companies of Norway, Venezuela, Mexico, Canada, France and Italy; to major users of energy products, such as Delta Airlines, United Airlines, Burlington-Northern Railroad, and Canadian Pacific Railway.

I also provided frequent market assessments and recommended trading positions to major trading firms, such as Enron, Phibro, Sempra and Vitol, and to large hedge funds.

As the recognized expert in energy hedging, I was selected by the former president, John Treat, of the New York Mercantile Exchange (NYMEX) to write the chapter on hedging in his book, Energy Futures (1990, 2000).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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