US total liquids production averaged 15.92 mb/d in May, up m/m by 55 thousand b/d, higher y/y by 1.85 mb/d. This was in line with our expectations of 15.85 mb/d, despite crude production underperforming our expectations as NGLs (+0.60 mb/d y/y, with 50% of the growth in ethane) marginally outperformed our forecasts. Crude production fell m/m by 30 thousand b/d m/m to 10.44 mb/d, higher y/y by 1.23 mb/d. The m/m was decline driven by continued maintenance in the Gulf of Mexico (GoM). Our crude production forecast expected a rebound in GoM output after several months of planned outages, predicting US crude production would rise m/m by 0.1 mb/d. However, GoM output came in 75 thousand b/d lower m/m at 1.5 mb/d even though production was scheduled to begin returning mid-month. Works on the Mars and Ursa platforms were allegedly extended to month-end and there were some reports of unplanned outages at Enchilada and Odyssey as well. Alaskan production fell by 1 thousand b/d m/m at 0.50 mb/d, lower y/y by 12 thousand b/d. These were offset by largely offset by 0.15 mb/d of m/m growth in Lower-48 onshore, led by Texas and New Mexico (a proxy for the Permian and Eagle Ford) output rising by 23 thousand b/d m/m to 4.9 mb/d. Permian production growth was muted once again, increasing m/m by just 67 thousand b/d in May after a similar 68 thousand b/d in April according to our model. This comes after m/m gains of 0.11 mb/d and 0.16 mb/d for February and March respectively. This is consistent with references in producer to moving rigs to other basins or adjusting growth to coincide with the start of midstream gathering facilities as well as the ongoing takeaway constraints out of the basin.
Production in Oklahoma and Kansas (a proxy for the Anadarko basin) fell by 2 thousand b/d m/m to average 0.63 mb/d (higher by 97 thousand b/d y/y), having fallen by 12 thousand b/d m/m in April. This comes after output in the basin increased strongly through Q1 18, with growth now being curtailed by NGL and gas takeaway constraints, and this has likely added to the recent tightness in Cushing as we have noted before. Production in Wyoming and Colorado (a proxy for Niobrara) was also down, falling by 4 thousand b/d m/m to 0.68 mb/d, higher by 0.13 mb/d y/y. The Bakken grew m/m by 12 thousand b/d to 1.25 mb/d for May. DJ production continues to increase slowly, up by 7 thousand b/d in May. Across all US basins apart from the Eagle Ford, we see some combination of gas processing, NGL and crude takeaway constraints hampering crude production growth to varying degrees in H2 18. Indeed, the recent rally in flat price will do little to boost near-term US production growth given the plethora of capacity constraints. Leading indicators from the service sector confirmed a pending slowdown in the pace of growth. Halliburton, the largest onshore operator in North America, guided down Q3 18 earnings owing to constraints in the Permian, even though producers continue to downplay this issue.