US Oil Output Still On The Rise

Why crude oil prices are on upward swing, by US energy agency

The agency, which monitors energy market trends for the world's richest countries, raised its outlook for US production in 2018 to a record 10.4 million barrels. According to a Friday report from the International Energy Agency (IEA), oil production in the U.S.is climbing past 10 million barrels a day, a number not seen since 1970.

Oil was mixed ahead of Energy Information Administration stockpile and production data after OPEC showed concern about USA production in its monthly oil market report Thursday.

The global cuts agreement, coupled with robust demand, has helped lift crude to a three-year high near US$70 (RM275.52) a barrel.

One of the key premises of the OPEC's production cut was to bring down the USA oil inventories back to its 5 year average in order to reduce the oversupply in the markets.

Prices, however, recovered after the Energy Department reported that commercial crude inventories fell by almost 7 million barrels last week - the ninth consecutive weekly decline. Some did fold or put production on hold but recent highs mean that shale companies are going back online.

Russia-a heavyweight non-OPEC producer with 256bn in reserves-and Saudi Arabia-the de-facto leader of OPEC-recently led the way for OPEC members and non-OPEC producers to cap off high oil prices. In the second quarter there will be a stronger build-up of oil stocks, including in the U.S. when consumption is declining.

As of Friday (January 19) at 1:35 p.m. EST, oil prices were down, sitting at $63.35 per barrel.




But the forecast was balanced by figures in the report showing OPEC's compliance with the supply cuts remained high in December and a further sharp slide in Venezuelan oil output. The "probability is growing" that the accord may conclude before the end of the year, said Harry Tchilinguirian, BNP Paribas SA's head of commodity strategy.

Oil prices have been gaining on tighter global supplies, amid efforts by the Organization of the Petroleum Exporting Countries, along with producers including Russian Federation, to cut output and drain global stocks. To make matters worse, another year of production cuts would have little effect on oil inventories - which the agency says are still 90 million barrels above OPEC's target.

Markets may come under pressure from rising USA production, analysts say.

Regarding its own production, OPEC recognizes it produced in December 42 thousand barrels more thabn in November (32.42 mbpd).

The production cuts, introduced by OPEC and 10 non-member oil producers, have reportedly become the major price driver.

Oil production in the U.S.is surging this year, surpassing the production capacity of Saudi Arabia and coming close to that of Russia, CNBC reports. Non-OPEC nations will be producing just short of 60 million bpd this year.

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