OPEC says US oil production to rise again in 2018

Violet Powell
March 15, 2018

Rising output, as well as seasonally low demand, mean that USA crude inventories rose by 1.2 million barrels in the week to March 9, to 428 million barrels, the American Petroleum Institute said on Tuesday.

U.S. West Texas Intermediate (WTI) crude futures were at $60.86 a barrel at 0033 GMT, up 15 cents, or 0.25 percent, from their previous close. Brent, the global benchmark, rose 25 cents, or 0.39%, to $64.89 a barrel on ICE futures Europe.

As a result, crude prices have not returned to their January highs of over $70 per barrel for Brent and nearly $67 for WTI.

Oil prices dipped on Wednesday in choppy trade, as a bigger-than-expected USA crude stock build pressured prices, but large draws of fuel stocks provided some support.

US crude production, pushed up largely by shale oil drilling, is expected to rise above 11 million bpd by late 2018, taking the top spot from Russian Federation, according to the International Energy Agency (IEA).

US bank Goldman Sachs said in a note that there was a "potentially large increase in (U.S.) drilling activity in coming weeks".

Oil prices stable after two-day decline, but rising US output drags
The reduction came as gross short positions on the New York Mercantile Exchange climbed to their highest level in almost a month. Oil has struggled to recover losses from last month's broader market slump after topping $66/bbl in January.

"Crude oil prices were dragged up by product prices on the back of significant declines" in fuel inventories, said Andy Lipow, president of Lipow Oil Associates.

Shale oil - which accounts for the majority of US supply - is expensive to produce, and is therefore unprofitable when prices are low. The first week in January saw the United States producing just 9.492 million bpd.

U.S. crude stocks rose by 5 million barrels, the biggest jump since late January, the U.S. Energy Information Administration (EIA) said.

Not all market indicators were bearish, however.

Oil prices got a boost early in the session from a broader investor push into commodities after Chinese data showed industrial production in the world's largest importer of raw materials grew more than expected over the first two months of the year. At the same time, crude throughput rose 7.3 percent to 93.4 million tonnes, implying a need for more imports.

At the same time, Moody's maintained its price band for North American natural gas at Henry Hub, the industry's chief measure of natural gas prices, at USD 2.50-3.50 per million British thermal units (MMBtu), while raising the price band for natural gas liquids (NGLs) to USD 20-30 per barrel, up from USD 19-27.

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