Record Highs and Lows for U.S. Oil Production, OPEC Output

Oil prices remain acceptable despite the inherently volatile market. File Image / Pixabay

The final day of May saw the crude market in a state that has become increasingly predictable, with declining production from some Organization of the Petroleum Exporting Countries (OPEC) members causing the cartel to hit new output lows; reports once more of U.S. crude output hitting new record highs; and oil prices slightly down but certainly far from unacceptable.

A Reuters survey released on Thursday reported that OPEC pumped 32.00 million barrels per day (bpd) in May, down 70,000 bpd from April's revised figure, about 730,000 bpd below its cutback restrictions target, and the lowest total since April 2017.

The biggest decrease in supply came from Nigeria due to unplanned outages, and the second-biggest decline came from Venezuela, where the oil industry is suffering under a rapidly collapsing economy: output in the Bolivian republic dropped to 1.45 million bpd in May.

Output from Libya and Iran also decreased slightly in May, with slightly more output from Saudi Arabia and Iraq unable to offset the total losses.

Equally familiar to crude observers was a report released Thursday by the Energy Information Administration that showed U.S. crude oil production jumping 215,000 bpd to 10.47 million bpd in March, the highest on record.

The EIA revealed that production in Texas rose 4 percent to almost 4.2 million bpd, a record high based on the data going back to 2005; North Dakota output was steady at around 1.2 million bpd, while output in the federal Gulf of Mexico declined 1.1 percent to 1.7 million bpd.

While these two reports are bound to support analysts who argue that we're either headed towards another oil glut or a supply shortage, a third set of figures suggests the crude market overall is not faring too badly despite recent tumult, especially compared to previous years: West Texas Intermediate fell 2.2 percent during May, breaking a two-month winning streak (but still within striking distance of $70 per barrel); Brent, meanwhile, will likely close with a more than 3 percent gain in May, a month that saw it break the $80 threshold.

Of course, the market expect more chaos ahead, triggered mostly by sentiment rather than fundamentals: ANZ bank said in a note, "With the OPEC meeting still another three weeks away, oil prices are likely to remain sensitive to headlines."

As for where oil prices should be in the near term, earlier this week Robert Phillips, CEO of Crestwood Equity Partners, suggested that the sweet spot is in the $55-$65 range; however, Jerry Bailey, president of Petroteq Energy Inc., predicted that oil will stay in the $70 to $80 range.