EIA: U.S. crude oil production in 2016 decreased, while exports increased


WASHINGTON, D.C. -- Even with a rising crude oil price throughout most of 2016, total U.S. oil production in 2016 was below its 2015 level. However, monthly production began growing in the fourth quarter of the year after declining over its first three quarters. Total production managed to stay above the five-year average thanks to prior year increases. With the removal of restrictions on exports of domestically-produced crude oil at the end of 2015, crude oil exports increased and the difference between Brent and WTI crude prices narrowed, which made crude imports relatively more attractive.

Both Brent and West Texas Intermediate (WTI) crude oil spot prices increased in 2016. The Brent spot price increased from $31/bbl in January to $53/bbl in December, while the WTI spot price increased from $32/bbl to $52/bbl over the same period. The increase for WTI was its largest annual price increase since 2009. It appears that the November 2016 OPEC agreement to cut production beginning in January 2017 led prices to rise at the end of 2016 in anticipation of some level of member country compliance with the production cuts.

Through the first three quarters of 2016, U.S. crude oil production trended downward, dropping from 9.2 MMbpd in January to 8.6 MMbpd in September. In the last quarter of 2016, production began to rise, reaching 8.8 MMbpd in December. Average oil production for 2016 was 8.9 MMbpd, below the 2015 level of 9.4 MMbpd, but still 1.3 MMbpd greater than the average annual level over 2011-15, when production was generally rising. Production trends varied significantly across U.S. regions. Notably, production in the Permian Basin increased from 1.9 MMobpd in January 2016 to 2.1 MMbpd in December. Production in the federal offshore Gulf of Mexico averaged 1.6 MMbopd in 2016, the highest annual production ever recorded for that region.

Although U.S. crude oil inventories were already elevated in 2015, they rose even further in 2016, with end-of-year inventories reaching 484 MMbbl, 35 MMbbl above their end of 2015 level. Inventories grew despite a 14,000 bopd rise in refinery inputs from 2015 to 16.2 MMbpd in 2016.

Crude by rail movements in the United States (including rail shipments to and from Canada) averaged 477,000 bpd in 2016, down 277,000 bpd from 2015, a 37% reduction. Shipments of crude oil by rail from the Midwest (PADD 2) to the East Coast (PADD 1) accounted for 77% of the decline, dropping an average of 212,000 bpd from 2015 to 158,000 bpd in 2016. Declining production in the Midwest, expansions in pipeline capacity, and more attractive imports due to narrowing crude price spreads all contributed to reducing movements of crude by rail.

Total U.S. crude oil imports grew to 7.9 MMbpd in 2016, nearly 515,000 bpd higher than in 2015. Narrower spreads with international crude prices made importing more attractive in 2016 compared with the previous year. The Brent-WTI spread averaged $4.82/bbl in 2015 and dropped to $0.87/bbl in 2016. East Coast (PADD 1) imports made up nearly half of the total U.S. import growth, climbing 242,000 bpd to average 865,000 bpd for the year. As in 2015, the Gulf Coast (PADD 3) accounted for the largest volume of imports, averaging 3.1 million bpd, but increased only 183,000 bpd from 2015.

In 2016, the first full year with no restrictions on exports of domestically-produced crude oil, U.S. crude oil exports averaged 520,000 bpd, 55,000 bpd (12%) higher than in 2015 (Figure 2). However, with recent declines in U.S. crude oil production, the rate of U.S. crude oil export growth has slowed significantly from its pace over 2013-15 notwithstanding rising U.S. crude oil imports that substituted for some domestic crude use at U.S. refineries.

Prior to the removal of crude oil export restrictions at the end of 2015, nearly all U.S. crude exports went to Canada, which was not subject to those restrictions. After restrictions were lifted, the number of destinations for U.S. crude oil exports increased. In 2016, the United States exported crude oil to 26 different nations compared with 10 different nations in 2015. Canada remained the top destination for U.S. crude oil exports in 2016, receiving 301,000 bpd, 263,000 bpd greater than the Netherlands, the second largest destination.

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