Modest U.S. Output Growth in June Viewed by Media as Harbinger of Further Shortfalls

Indications are that the Americans will post huge output into 2019.

Even though the week is shaping up to be one in which sentiment for the crude market is shifting from concern about supply tightening to a growing conviction that there will be enough supplies to meet any need, worries still linger about output rates.

Specifically, the Energy Information Administration disclosed in a new report that U.S. drillers pumped 10.44 million barrels per day (bpd) in May -- about 300,000 fewer barrels per day than projected.

Bloomberg remarked that the decline "suggests that figures for June also may clock in lower than estimated" - although the news agency didn't explain why and conceded that "for now, the agency's preliminary June production estimate is a record 11 million bpd."

For the record, the EIA's latest Short-Term Energy Outlook from July forecasts that U.S. crude production will average 10.8 million bpd this year, up from 9.4 million bpd in 2017, and crude production is currently expected to average 11.8 million bpd in 2019.

Of course, almost any good news story has its share of detractors: Bloomberg also reported that production of the Organization of the Petroleum Exporting Countries (OPEC) grew by 230,000 bpd in July, to 10.65 million bpd, just shy of an all-time peak reached in 2016, according to the news agency's survey of analysts, oil companies, and ship-tracking data.

Bloomberg also noted that the Saudis' output "was below the 10.8 million bpd threshold that the kingdom was said to be indicating it would pump in July, suggesting demand for its oil isn't as strong as initially expected."

But Iran, which is bracing for the return of U.S. sanctions that has already caused many of its crude customers to stop doing business with the Islamic republic, dismissed OPEC's output as modest and claimed the cartel is unable to replace 2.5 million bpd of Iranian exports.

Still, news of countries boosting output keep rolling in, the latest being Wednesday's disclosure that Iraq's oil exports from its southern ports averaged 3.543 million bpd in July, above the June average of 3.521 million bpd.

It's worth noting that even overwhelming evidence can still be trumped by sentiment in a market as volatile as that of crude, case in point: earlier this week U.S. crude prices shot up 2.12 percent despite news of massive output from various countries, because of lingering worries about the U.S. sanctions against Iran and word that Suncor Energy may not be able to fully restore operations at its Alberta oil sands facility as quickly as initially thought.