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Last updateFri, 18 Aug 2017 1pm

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API: Petroleum Demand Last Month Highest Since 2007

Total petroleum deliveries moved up 2.6% from June 2016 and were up by 1.0% from May to average 20.3 million barrels per day in June. These deliveries were the highest deliveries for the year and the highest deliveries for the month of June in 10 years, since 2007. For the second quarter, total domestic petroleum deliveries increased 3.0% compared to the second quarter 2016. For year to date, total domestic petroleum deliveries increased 1.6% compared to the same period last year.

At 9.3 million barrels per day, U.S. crude oil production in June increased 7.2% from June 2016, but nearly unchanged from May. Compared to second quarter 2016 and year to date 2016, domestic crude oil production increased 4.6% and 1.4%, respectively. This was the highest crude production level for the month of June in 45 years, since 1972. 


U.S. Crude Oil Production to Reach Highest Level in 2018

In EIA’s latest Short-Term Energy Outlook (STEO), total U.S. crude oil production is forecast to average 9.3 million barrels per day (b/d) in 2017, up 0.5 million b/d from 2016. In 2018, EIA expects crude oil production to reach an average of 9.9 million b/d, which would surpass the previous record of 9.6 million b/d set in 1970. EIA forecasts that most of the growth in U.S. crude oil production through the end of 2018 will come from tight rock formations within the Permian region in Texas and from the Federal Gulf of Mexico.

In the July STEO, the Permian region is expected to produce 2.9 million b/d of crude oil by the end of 2018, about 0.5 million b/d more than the estimated June 2017 production level, representing nearly 30% of total U.S. crude oil production in 2018. The Permian region covers 53 million acres in the Permian Basin of western Texas and southeastern New Mexico. 

Shale Sector to Be Cash Flow Positive by 2020

The tight oil sector has struggled to generate positive cash flow since 2010. Last year, only one company in the sector posted positive cash flow. But there is light at the end of the tunnel. Wood Mackenzie’s new report "When will tight oil make money?" calculates that the five largest tight oil players could become cash flow positive by 2020.

But it is not all good news. Tight oil returns are highly sensitive to oil price, and in the event that oil prices remain flat or even fall (not our base case view), only the best operators, in the best plays can expect to make returns.

The report also identifies tight oil’s two key advantages: the scale of the opportunity and capital investment flexibility. 

U.S. Chemical Production Moved Higher in June

According to the American Chemistry Council (ACC), the U.S. Chemical Production Regional Index (U.S. CPRI) edged higher by 0.3% in June, following a 0.3% gain in May, and a 0.4% decline in April, as measured on a three-month moving average (3MMA) basis. During June, output grew in all regions except the Ohio Valley which was flat and the Gulf Coast which edged lower.

Also measured on a 3MMA basis, chemical production was mixed. There were gains in the production three-month moving average output trend of consumer products, pharmaceuticals, other specialty chemicals, pesticides and organic chemicals. 

U.S. Fuel Ethanol Production Continues to Grow in 2017

Through the first six months of 2017, U.S. weekly ethanol production averaged 1.02 million barrels per day (b/d), an increase of 5% over the same period in 2016. On a weekly basis, U.S. ethanol production set a record of 1.06 million b/d in the week of January 27, 2017, and it has averaged near or above 1 million b/d in every week of 2017 except for a few weeks in April, when ethanol plants typically undergo seasonal maintenance. If ethanol production remains relatively high through the second half of the year, as EIA’s Short-Term Energy Outlook expects, 2017 will set a new record for annual fuel ethanol production.

U.S. ethanol plant capacity increased for the fourth consecutive year in 2017, reaching a nameplate capacity of approximately 15.5 billion gallons per year in January. Total ethanol production is expected to reach 1.02 million barrels per day in 2017, a rate equivalent to 15.8 billion gallons. Annual ethanol production is able to exceed capacity for two reasons: new production capacity has likely been added since the January 2017 capacity survey date, and many ethanol plants are able to operate at levels beyond their nameplate production capacity. 

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