Oil prices keep rising amid supportive comments

Mae Love
January 13, 2018

Though production hasn't been impacted, the protests are widely viewed as reason enough for U.S. President Donald Trump to go against the principles of the Joint Comprehensive Plan of Action - the United Nations -backed Iranian nuclear deal - and decide Friday to re-impose oil-related sanctions on Iran. Traders said relatively weak China December oil data had weighed on prices.

On Tuesday, the EIA boosted output expectations, saying it now sees overall production at record highs, surpassing 11 million barrels per day (bpd) by 2019.

EIA forecasts the West Texas Intermediate (WTI) crude oil spot price will average $55/b in 2018 and $57/b in 2019.

US crude production is forecast to average 10.3 million bpd in 2018, which would be the highest annual average USA production, surpassing a previous record of 9.6 million bpd in 1970.

Also impacting prices is an increase in Asian demand for crude oil and petroleum products.

Analysts say the potential for robust U.S. production growth will be a challenge to OPEC and other leading oil exporters such as Russian Federation, which have cut production in an effort to eliminate the worldwide glut. Although more infrastructure to export crude oil has been recently built, U.S. exporters must still use smaller, less-economic vessels or complex shipping arrangements, which add to costs. Between January and October 2017, U.S. production rose by 812,000 barrels per day, according to the U.S. Energy Information Administration (EIA). Gasoline consumption, averaging 9.1 million barrels a day over the past four weeks, is up a healthy 2.5 percent from a year ago. EIA expects global inventories to increase by about 0.2 million b/d in 2018 and by about 0.3 million b/d in 2019.

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That would match the all-time monthly record of 10.04 million bpd set in November 1970; oil production declined after that as the United States increasingly relied on imported crude. OPEC, along with non-members including Russian Federation, have extended through the end of this year a deal to cut supply by 1.8 million bpd.

Eagle Ford production is expected to be from 1.2 million bpd to 1.3 million bpd this year and next, which EIA said is slightly above the 2017 level.

The ongoing push to cut production should keep oil prices afloat over the near-term especially as USA output falls back from fresh record-highs. US crude oil production is expected to continue increasing in 2019 to an average of 10.8 million b/d.

Total US petroleum and other liquid fuels consumption is forecast to average 20.3 mb/d this year, up 2.4% from 2017, and rising by another 340,000 b/d, or 1.7%, in 2019.

That's even with a 2.4% rise in global demand this year and 1.7% in 2019, according to the EIA.

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