US total liquids production rose m/m by 62 thousand b/d to 15.86 mb/d in April, around 0.1 mb/d above our forecasts and higher y/y by 2 mb/d. NGLs production led the m/m rise, up by 87 thousand b/d to yet another record high and higher y/y by 0.63 mb/d, thanks to surging ethane production (+0.37 mb/d). Crude production, however, fell m/m by 2 thousand b/d to 10.47 mb/d, 1.3 mb/d above year ago levels, driven by maintenance in the Gulf of Mexico. This is what drove us to predict a m/m fall in April US production, albeit a larger 66 thousand b/d drop. This was in sharp contrast to the EIA weeklies showing a 0.16 mb/d m/m increase in production, once again underscoring the fact that the weekly figure is an estimate. Gulf of Mexico output fell m/m by 0.1 mb/d to 1.6 mb/d due to planned maintenance at the Mars and Ursa platforms. Alaskan production was also lower by 15 thousand b/d m/m at 0.50 mb/d. This was offset by 0.11 mb/d of m/m growth in Lower 48 onshore, led by Texas and New Mexico (a proxy for the Permian and Eagle Ford) increasing by 55 thousand b/d m/m to 4.87 mb/d in April. This is in line with seven more rigs and 14 more completions m/m in the area. However, Permian m/m production growth slowed significantly in April to 42 thousand b/d from a March increase of 0.16 mb/d. This is in-line with producers’ guidance suggesting that takeaway capacity constraints are already leading to slower growth in the basin, a trend that will worsen from late Q3 18 and could potentially even lead to fewer well completions.
Production in Oklahoma and Kansas (a proxy for the Anadarko basin) fell by 11 thousand b/d m/m to average 0.63 mb/d (but was higher by 89 thousand b/d y/y). The drop is likely due to NGL and gas takeaway (and processing) constraints, which have also led to Conway’s propane prices trading at unusual discounts to Mont Belvieu. The capacity constraints will only be alleviated later in the year once ONEOK’s 60 thousand b/d expansion of its Sterling III pipeline comes online. The crude output decline from March is small but production has likely remained subdued due to these NGL and gas infrastructure constraints and this could be adding to the stress we are now seeing at Cushing as any change in production in the area directly impacts the hub. Production in Wyoming and Colorado (a proxy for the Niobrara) increased by 21 thousand b/d m/m to 0.68 mb/d, higher y/y by 0.16 mb/d. North Dakotan production also rose, by 61 thousand b/d m/m to come in at 1.21 mb/d in April.
With oil prices rallying, US production should rise strongly, in theory. However, infrastructure constraints in the Permian, Bakken and DJ will temper growth rates in these basins, while there are signs of the Eagle Ford attracting more attention and capital, so growth could surprise to the upside there. Overall crude production will still slow in H2 18 vs H1 18 y/y growth.