Record-breaking U.S. supply is weighing on the global oil market (NYSEARCA:USO)

Crude oil production from the U.S. reached a new all-time high of 13.2M bbl/day in September, according to data released last week, outpacing expectations and causing a big problem for OPEC+, which agreed last week to further output cuts in an effort to prop up faltering prices.

The U.S. accounts for 80% of the expansion in global oil supply this year, according to the International Energy Agency, and its production is expected to grow by 850K bbl/day, well below the pace reached earlier in the shale revolution but much faster than analysts had forecast.

The American supply juggernaut is “the main reason” why markets have not tightened as many expected, Rapidan Energy president Bob McNally told Financial Times.

Scott Sheffield, CEO of top Permian Basin producer Pioneer Natural Resources (PXD) told FT he is “very surprised” by the growth, adding “there’s a good chance we may reach 15M bbl/day within five years.”

Shale remains “relatively early in its life” in terms of the technological advances that could drive higher productivity, Chevron (CVX) chief technology officer Eimear Bonner said.

Crude oil futures settled higher Friday for the first time since OPEC’s November 30 announcement of additional voluntary production cuts, but the rebound was not enough to avoid a seventh straight weekly loss.

Front-month Nymex crude (CL1:COM) for January delivery settled +2.7% Friday to $71.23/bbl, and front-month February Brent (CO1:COM) ended +2.4% to $75.84/bbl; for the week, WTI fell 3.8% and Brent dropped 3.9%.

Also, January gasoline (XB1:COM) closed +2.4% Friday to $2.0498/gal, while January diesel (HO1:COM) finished +1.3% to $2.581/gal, down 3.4% and 3% for the week, respectively.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)

“Concerns about slowing global growth and China’s economic health are mounting after rating agency Moody’s lowered the country’s rating to negative from stable,” according to a research analyst at Leverage Shares, but newly released U.S. economic data was upbeat, with jobs created in November totaling a higher than expected 199K.

Separately, the U.S. Department of Energy announced plans to buy up to 3M barrels of oil for the Strategic Petroleum Reserve, part of ongoing efforts to refill the oil reserve following the large drawdown in the SPR last year.

The energy sector (XLE) was easily the week’s worst performer, -3.3%.

This week’s top 3 gainers in energy and natural resources: Top Ships (TOPS) +29.8%, Nouveau Monde Graphite (NMG) +19%, Spruce Power (SPRU) +14.9%.

This week’s top 10 decliners in energy and natural resources: BP Prudhoe Bay Royalty Trust (BPT) -16.1%, Fluence Energy (FLNC) -14.9%, Sasol (SSL) -14.8%, Diana Shipping (DSX) -14.5%, Iamgold (IAG) -14.4%, Baytex Energy (BTE) -13.4%, AngloGold Ashanti (AU) -13.3%, Mesa Royalty Trust (MTR) -12.6%, TPI Composites (TPIC) -12.4%, Antero Resources (AR) -12.4%.

Source: Barchart.com