The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, is up more than 20% year-to-date even as domestic oil production is reaching record levels. Oil investors should prepare for more U.S. oil output records to be achieved.
Other factors contributing to oil’s surge this year was the U.S. exploring the possibility of tapping into their emergency reserves to stymie disruptions in oil supply, notably the slashing of Iranian oil imports. The U.S. is currently pumping oil at record levels of around 11 million barrels per day.
“Crude oil production in the U.S. shale patch will hit 7.59 million bpd next month, the Energy Information Administration said in its latest Drilling Productivity Report. This is 79,000 bpd more than this month’s estimated production,” reports OilPrice.com.
Most of the increase in U.S. oil output is being led by West Texas, including the oil-rich Permian Basin.
“The biggest increase, once again, will come from the Permian, where producers will add 31,000 bpd to overall daily production from the current 3.427 million bpd to 3.458 million bpd,” according to OilPrice.com. “The second-largest contributor to the monthly increase will be the Eagle Ford, where the EIA estimates production will rise by 16,000 bpd to 1.449 million bpd in October.”
OPEC’s Role
The Organization of Petroleum Exporting Countries could be looking to take advantage of higher prices by bringing more supply to market.
While oil prices strengthened in recent weeks on the lower supply outlook out of Iran, investors should keep in mind that OPEC can step in at anytime to fill in the gap. The International Energy Agency said crude oil output among OPEC members surged by 420,000 barrels per day to average 32.63 millions a day in August, the Wall Street Journal reports.
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Additionally, U.S. shale output is expected to climb next year and into 2020.
“Recently, HFI Research forecast that the United States’ shale oil production would reach 9.66 million bpd in 2020, growing by a combined 3.84 million bpd between 2017 and 2020. This will only happen if pipeline bottlenecks in the Permian are dealt with, however. Should this happen quickly enough, the star play¬—along with the Eagle Ford and Bakken—will be the driver behind the overall shale production increase,” reports OilPrice.com.
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