My Gusher Finally Came In - U.S. Oil Production Extends Its Influence Over Global Crude Markets

Today OPEC convened in Vienna, expecting to extend production cuts for another nine months beyond June 30. Both the OPEC and NOPEC countries have generally kept to their commitments since January, which has been extremely good news for U.S. producers; they are enjoying higher prices, steadily improving economics and above all, the opportunity to capture market share from OPEC/NOPEC. Since the deal was announced this past November, U.S. production is up 600 Mb/d — about half of OPEC’s promised 1.2 MMb/d cut — and at this rate U.S. producers will have grabbed all of OPEC’s forgone market share by the end of the year. Put simply, the U.S. has taken on a leading role in international oil markets, and as a result it’s now more important than ever to understand on a more granular and real-time level what’s going on in U.S. crude production, imports, exports and inventory. In today’s blog we examine how U.S. producers have been profiting from OPEC/NOPEC efforts to curtail worldwide supply and prop up prices, and how RBN’s new weekly report, “The Gusher,” tracks the key factors affecting U.S. crude.

It’s been a heady six months for U.S. crude oil producers, many of whom struggled through 2015 and much of 2016 as crude oil prices fell, drilling activity declined and bottom lines took a big hit (see Recovery). Then, as we said in Is This The Real Life? Is This Just Fantasy?, OPEC’s 13 member countries on November 30 (2016) agreed to reduce their output (from October 2016 levels) by 1.2 MMb/d starting on January 1 (2017). Ten days later, on December 10, 11 non-OPEC (NOPEC) countries (including Russia and Mexico) joined in, saying they would collectively cut their production by another 558 Mb/d), also effective on New Year’s Day. The OPEC/NOPEC commitments ran to June 30 (2017), with the possibility of being renewed after that — all with the hope of maintaining oil prices at levels that work to all producers’ advantage.

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Well, the OPEC/NOPEC deal held — the Saudis, Russians, Iraqis and others appear to have largely kept to their promises, and production by the participating countries did in fact, decline. Yesterday (Wednesday, May 24), the Joint Ministerial Monitoring Committee — composed of six OPEC and non-OPEC nations — agreed ahead of today’s OPEC meeting to support an extension of the nearly 1.8 MMb/d in production cuts for another nine months, through March 2018.

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