U.S. crude oil production on rise

by Talk Business & Politics staff ([email protected]) 156 views 

U.S. crude oil production rose for the second consecutive month in November, the first such occurrence since early 2015, according to the latest data available from the U.S. Energy Information Administration. In November, production rose by 105,000 barrels per day, after rising by 232,000 barrels per day in October. Drilling increased in the Permian region, spanning Texas and New Mexico, and several projects started in the Federal Offshore Gulf of Mexico. The new activity “more than offset declining production from other regions in October and November 2016.”

Production in the lower 48 states rose 104,000 barrels per day in October, but fell by 2,000 barrels per day in November. Drilling in the Gulf of Mexico rose by 85,000 barrels per day in October and by 89,000 barrels per day in November. Alaskan oil production offset the remaining differences.

Drilling increased in the Permian region along with the price of West Texas Intermediate crude oil, rising to $45 a barrel by the second half of 2016, from $30 a barrel in the first half of the year. The price of WTI crude is $54.33 a barrel, up 93 cents or 1.74%, according to Bloomberg. Projects that started in the Gulf of Mexico in the latter part of 2016 had been planned and approved between 2012 and 2014.

The Permian region was the only region in EIA’s Drilling Productivity Report that didn’t have year-over-year production declines between 2014 and 2016. “This region benefits from a number of highly productive formations located within what is an established oil-producing region that allows producers to continue operations despite low prices,” according to EIA. After oil prices rose to more than $45 a barrel in May 2016, the region added 85 drilling rigs between May and November, “suggesting that some operators can generate positive returns in the region at those prices.”

While other on-shore regions experienced declines in November, “recent drilling activity suggests that production may be increasing in these areas as well,” according to EIA. Since November 2016, the total number of U.S. rigs has risen by 123, with 39% of the increase in regions outside of the Permian, according to Baker Hughes. In the Eagle Ford, Williston and Cana Woodford regions, the total numbers of rigs increased by 23, three and 12, respectively.

On average, U.S. crude oil production was 8.9 million barrels per day in 2016. Production is expected to rise to 9 million barrels per day in 2017 and 9.5 million barrels per day in 2018, according to EIA’s Short-Term Energy Outlook. Production in the Gulf of Mexico is expected to increase by 30,000 barrels per day in 2017 and 140,000 barrels per day in 2018, reaching a total of 1.8 million barrels per day.