US oil production growth has stalled meaningfully since last year. But you wouldn't know that by looking at pundits like Javier Blas talking about the growth from January to August (2023) vs January to August (2024):
There are so many issues with this comparison that I don't even know where to start. For starters, the EIA made a material methodology revision beginning in June 2023 that was not mentioned in the tweet. The EIA acknowledged that the persistently positive adjustment implied that US oil production was being overstated.
As a result, the EIA implemented transfers to crude oil supply and materially revised higher production starting in June 2023.
In addition, by including NGLs in the equation, it overinflates the actual crude production growth. As we've written countless times this year, US shale oil basins are getting gassier, so associated gas production and NGLs will outpace crude production growth.
Finally, to compare apples to apples, you have to include the adjustment factor in calculating real supplies. Adjustment is a real supply figure no matter what the bears or bulls argue. Adjustment is as real as real gets because it directly impacts the build and draws in US commercial crude storage.
In our oil market balance, for example, we use crude production + adjustment to factor in how much supply/demand balances change. We typically use a static +700k b/d to account for 1) the blending (i.e. transfers to crude oil supply) and 2) adjustment.
In addition, you will have noticed that in our weekly EIA crude storage estimate, we have a column titled, "plant condensate." The label is an old one from the past when EIA didn't know what was contributing to the consistently positive adjustment. There was an explanation from the head of the weekly reports that the positive adjustment may be the result of plant condensate. Ever since then, we've been using this as our label.
With that said, this is the comparison of US crude production from Jan to August 2023 vs Jan to August 2024:
Jan to August 2023: 13.047 million b/d
Jan to August 2024: 13.175 million b/d
+128k b/d
I also found the other comparison a bit funny. Javier took the December 2023 US oil production and compared it to August 2024. But if he had done that exercise with US crude production + adjustment, this would have been the result:
Dec 2023 - 13.719 million b/d
August 2024 - 13.573 million b/d
-146k b/d
You can see from this exercise that comparing a certain month to one month at the end of the year is akin to doing mathematical alchemy. It's far better to gauge the trend by taking the 3-month moving average and comparing it to the exit quarter from the previous year.
If we do this exercise, this is what we find:
Q4 2023: 13.196 million b/d
June to August 2024: 13.221 million b/d
+2.5k b/d
So yes, US oil production growth is in the eye of the beholder. Beware who you are reading to get the data.
An Honest Assessment
Here's the truth about US oil production. Growth in 2023 was overstated, so the slower growth you are seeing today is the result of a misconception in the data. As I wrote previously, EIA made a big revision in its methodology in the middle of 2023, so it made all the growth comparisons out of whack.
US oil production is currently growing. August US oil production was going to grow as July figures were impacted by Hurricane. Our real-time data showed production + adjustment of around ~13.53 million b/d, and the EIA reported ~13.57 million b/d.
For July, EIA under-reported production + adjustment by ~500k b/d, so there was a catch-up on the balance side.
(Note: You can see our track record of comparing EIA data to our real-time model.)
While the headline figures from the EIA showed US oil production averaging ~13.4 million b/d, the more realistic production figure was closer to ~13.2 million b/d.
Inclusive of transfers to crude oil supply and adjustment, EIA's reported figure of 14.238 million b/d was ~338k b/d higher than our figure (13.2 + 0.7), and more than makes up for the under-reporting in July.
Going forward, the easiest way to know that we are right is by watching the production + adjustment figure. September production is expected to be lower than August, and October production is on track to be slightly higher than August.
By our estimate:
September's US oil production (including adjustment) should show a figure close to ~13.2 million b/d. EIA will report a figure close to ~13.4 million b/d with a negative adjustment of ~200k b/d.
October's US oil production (including adjustment) should show a figure close to ~13.3 million b/d. EIA will report a figure close to ~13.5 million b/d with a negative adjustment of ~200k b/d.
The Ultimate Barometer
Storage, storage, storage.
Because we publish our weekly US crude storage estimates, if we start missing badly on our forecast, then you will know something is off.
For example:
If the EIA reports lower crude builds or higher crude draws than our estimates, then you will know that we are overstating US oil production.
If the EIA reports higher crude builds or lower crude draws than our estimates, then you will know that we are understating US oil production.
At the end of the day, crude storage is the most accurate figure in the data, so we will let the data do the talking.
As a free subscriber, you will get our weekly US crude storage estimates for free, so please subscribe!
Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.