How is oil production performing?
''U.S. Oil Production Stays Flat For The First Half Of 2019
- EIA 914 came out today and US oil production for June 2019 came in at 12.082 mb/d.
- US oil production for the first 6 months of 2019 was flat versus exit December 2018 figures.
- But production growth will be heavily weighted in the 2nd half of the year.
- We have US oil production exiting 2019 at 12.95 mb/d.
- US oil production is at ~12.45 mb/d today and 12.6 mb/d in September
EIA 914 report came out today and US oil production declined slightly versus May. June production came in at 12.082 mb/d versus 12.115 mb/d. As a result, US oil production finished the first half of 2019 flat versus December 2018.
But for those of you thinking that US shale production won't grow, you may have to think again. Our leading indicator has been able to predict the production figures, so our latest reading shows US oil production of ~12.45 mb/d in August with September around ~12.6 mb/d. Keep in mind that July US oil production was impacted by hurricane-related shut-ins which amounted to ~300k b/d.
The growth rate we are currently observing in Q3 2019 is around ~150k b/d per month with Q4 moving down to ~100k b/d per month. As a result, our projected US oil production exit is around ~12.95 mb/d. This will be a massive deceleration in US shale's growth rate as you can see above. By December 2019, we see US oil production growth y-o-y decelerating to just ~4% y-o-y.
This will bode well for oil market balances going into H1 2020 as we expect the production profile to be flat again in H1 2020 with the growth weighted towards H2 again. For our US crude storage balance, this reaffirms our view that US crude storage will fall to ~380 mbbls by year-end. Our "lower US oil production forecast" scenario still has some remote possibility of coming to fruition, but we would put the odds at less than 25%.
For our updated forecast scenario, we have US oil production exiting at ~13.15 mb/d with 200k b/d as plant condensate for an extra buffer. This storage outlook scenario would push the fundamental fair value of WTI to ~$70 to ~$75/bbl.''