OPEC Sees US Crude Output Rising Faster; Oil Finds Resistance At $60

OPEC Sees US Crude Output Rising Faster; Oil Finds Resistance At $60

"First, the EIA dramatically overhauled its forecasts, predicting USA oil production would hit 11 million barrels per day (mb/d) this year, rather than late next year", reports OilPrice.com.

Oil prices ended largely unchanged on Tuesday as a weaker dollar spurred a rebound from an early slide after the International Energy Agency forecast supply could outstrip demand. The producers agreed in November to extend self-imposed limits on output until the end of this year, seeking to counter a glut fed partly by USA shale drillers.

Dhar says this highlights just how resilient United States shale oil supply has been despite volatile oil prices and shortages of available workers, creating a headache for both other crude producers and oil bulls alike.

Brent crude futures were at $63.54 per barrel at 0728 GMT, up 75 cents, or 1.2%, from the previous close. The IEA is more bearish in its oil market report, warning that non OPEC supply growth might outpace demand growth in 2018.

The International Energy Agency on Tuesday raised its estimate of global oil demand growth this year to 1.4 million b/d, but also raised its estimate of U.S. oil output growth to 1.52 million b/d, citing the shale industry's "second wave" of growth.

Brent crude futures were up 21 cents at $62.80 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were up 6 cents at $59.35, Reuters reported.

The reason why the oil market might suffer from a renewed glut largely comes down to soaring US shale production.

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The biggest pressure on oil prices is now continuing to produce in the U.S., which, according to official data, reached production of 10.25 million barrels per day. "In just three months to November, crude output increased by a colossal 846,000 b/d, and will soon overtake that of Saudi Arabia".

Crude edged higher after the worst weekly decline in two years as OPEC shrugged off the threat that US shale drillers will swamp the market with excess supplies.

"As President of the OPEC Conference, you have shown exemplary vision and leadership through 2017 with your stewardship of the implementation of the "historical" agreement to seek oil market stability among some 20 OPEC and non-OPEC countries to the benefit of producing and consuming nations alike", said Malcolm Brinded CBE, President, Energy Institute.

Rising oil prices and surging US crude exports raise concerns that Russian energy giants will try to exit the deal, which began in 2017 and runs through 2018.

Back in 2014, US shale production was growing so fast that it ended up crashing the market. USA output will soon surpass that of the cartel's biggest producer, Saudi Arabia, and may overtake Russian Federation as global leader by the end of the year, according to the IEA. Increasing prices lead, after a few months, to more drilling, more completions, more production and more hedging.

"This, together with good economic indicators and compliance with output cuts, indicate that the crude market will balance within the year". "I think we are going to be sticking with our policy (to withhold production) throughout 2018".

Crude oil prices followed broader stock indices lower this week to break consistently in the mid $60 range.