Forecast predicts two years of record USA oil production

Javier Howell
January 10, 2018

According to Iran's oil ministry news service Shana, Bijan Namdar Zanganeh said "members of the Organization of the Petroleum Exporting Countries (OPEC) are not keen on increased Brent Crude prices to above 60 dollars per barrels because of shale oil". The global benchmark traded at $67.92 a barrel, up 14 cents, or 0.2 percent, at 9:20 London, after earlier gaining as much as 51 cents. U.S. West Texas Intermediate crude (WTI) gained 36 cents to $62.09 and reached its highest since May 2015 as well at $62.56.

The market has rallied in recent weeks as investors bet on an increasingly tighter market, aided by data showing declining US stockpiles and threats to supply from major producers such as Iran and Venezuela.

The Organization of the Petroleum Exporting Countries and allies including Russian Federation are keeping supply limits in place in 2018, a second year of restraint, to reduce a price-denting glut of oil held in inventories.

Oil prices closed at fresh three-year highs Tuesday, as geopolitical risk and confidence in global growth continued to buoy markets.

"We expect oil demand growth to outpace non-OPEC supply growth in both 2018 and 2019", Standard Chartered analysts said in a note. Inventories at Cushing dipped below 50 million barrels through the week ended 29 December, the first time they have dropped below that level since February 2015, according to the most recent Energy Information Administration data.

Forecast predicts two years of record USA oil production

There is no sign yet that OPEC is prepared to relax its supply restraint.

Some in OPEC are anxious a prolonged rally could stimulate more USA shale oil output, however, creating more oversupply that could weigh on prices and market share.

In its Short-Term Energy Outlook, released Tuesday, the agency said it expects USA production to break above 11 million barrels per day in November 2019. Only top producers Russian Federation and Saudi Arabia produce more.

Despite this, US production is expected soon to rise above 10 million barrels per day, largely thanks to soaring output from shale drillers.

The surge comes as a welcome boost for the revenues of oil-producing nations, many still reeling from a price collapse that started in mid-2014 when crude began to fall steeply from above $100 per barrel due to oversupply.

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