The 4wk average for US oil production ($USO) ($OIL) has now fallen 8 straight weeks (from 9.6M to 9.325M). That matches production cuts in Dec 2011 and we have to go back to the “Great Recession” to see deepers cuts. Given recent even sharper production declines over the last couple weeks (last week was 9.2M), that will easily hit 9 weeks when the EIA reports next week and it would take a significant production increase the following week to avoid 10 straight weeks of declines.
It is interesting that while the production cuts were deeper in the fall of 2008 than current (as the world entered into a true financial crisis), the duration of the cuts was far shorter than what we are seeing now. That says to me that those cuts were in response to temporary extreme factors (think back to the fall of 2008) and today’s are more fundamental in nature. What I mean by fundamental is that as hedges are being run off current production rigs are being shuttered if not economical at $40-$50 oil. Because of that I expect to see production continue to fall until oil prices rise back to $60-$70.
“Davidson” submits:
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