Despite increasing crude oil prices throughout most of 2016, total U.S. crude oil production in 2016 was below its 2015 level. However, monthly production began growing in the fourth quarter of the year after declining over the first three quarters. Total 2016 production remained above the five-year average. With the removal of restrictions on exports of domestically produced crude oil at the end of 2015, crude oil exports increased. At the same time, the difference between Brent and West Texas Intermediate (WTI) crude oil prices narrowed, which made crude oil imports relatively more attractive and caused total imports of crude oil in 2016 to also increase.
Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Both Brent and WTI crude oil spot prices increased in 2016. The Brent spot price increased from $31 per barrel (b) in January to $53/b in December, while the WTI spot price increased from $32/b to $52/b over the same period. The increase for WTI was its largest annual price increase since 2009. The November 2016 Organization of the Petroleum Exporting Countries (OPEC) agreement to cut production beginning in January 2017 led to further price increases at the end of 2016 in anticipation of some level of member country compliance with the production cuts.
Source: Thomson Reuters
Through the first three quarters of 2016, U.S. crude oil production trended downward, dropping from 9.2 million barrels per day (b/d) in January to 8.6 million b/d in September. In the last quarter of 2016, however, production began to rise, reaching 8.8 million b/d in December. Average oil production for 2016 was 8.9 million b/d, lower than the 2015 level of 9.4 million b/d but still 1.3 million b/d greater than the average annual level over 2011–2015, when production was generally rising. Production trends varied significantly across U.S. regions. Notably, production in the Permian Basin increased from 1.9 million b/d in January 2016 to 2.1 million b/d in December. Production in the Federal Offshore Gulf of Mexico averaged 1.6 million b/d in 2016, the highest annual production ever recorded for that region.
Although U.S. crude oil inventories were already high in 2015, they rose even further in 2016, with end-of-year inventories reaching 484 million barrels, 35 million barrels higher than their end of 2015 levels. Inventories grew despite a 14,000 b/d rise in refinery inputs from 2015 levels to 16.2 million b/d in 2016.
Crude by rail movements in the United States (including rail shipments to and from Canada) averaged 477,000 b/d in 2016, down 37% from 2015. Shipments of crude oil by rail from the Midwest to the East Coast accounted for 77% of the decline. Declining production in the Midwest, expansions in pipeline capacity, and more attractive imports due to narrowing crude oil price spreads all contributed to reducing movements of crude by rail.
Total U.S. crude oil imports grew to 7.9 million b/d in 2016, nearly 515,000 b/d higher than in 2015, as smaller price differences between international and domestic crude oils made importing more attractive in 2016 compared with the previous year. East Coast imports made up nearly half of the total U.S. import growth, increasing 242,000 b/d to average 865,000 b/d for the year. As in 2015, the Gulf Coast accounted for the largest volume of imports, averaging 3.1 million b/d, but increasing only 183,000 b/d 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 b/d, 55,000 b/d (12%) higher than in 2015. However, with recent declines in U.S. crude oil production, the rate of U.S. crude oil export growth has slowed significantly from its 2013–2015 pace.
Source: EIAPrevious Next