OPEC oil output rises in June
- Author: Eleanor Harrison Jul 13, 2017,
Jul 13, 2017, 0:32
The US government cut its crude production outlook for the next year and as fuel inventories plunged.
U.S. refineries and consumers have contributed to higher demand for crude oil in North America, whilst production, including shale oil, has faltered amidst disinvestment concerns, brightening the outlook for oil bulls.
Oil prices on Wednesday extended gains from the previous day as the US government cut its crude production outlook for next year and as fuel inventories plunged.
Brent crude LCOc1, the global benchmark, grew 73 cents to touch at $48.25 a barrel, while USA crude CLc1 increased by 81 cents to $45.85, reported Reuters. "US ethanol production is on track to reach a record high this year of just over 1 million barrels per day, and then decline slightly in 2018".
This week's draw, according to the API, brings the total inventory build for crude oil in 2017 to just over 1 million barrels. If confirmed by the Energy Information Administration later in the global day, it would show strong US gasoline demand thanks to the annual summer driving season.
Crude oil prices got a life Tuesday following a report from the U.S. Energy Information Administration that said U.S. crude oil production for the year should average 9.3 million barrels per day in 2017 and 9.9 million barrels per day next year.
And the punchline: OPEC expects to oversupply global markets markets by ~900k b/d in 1Q next year, with U.S. shale scapegoated as the culprit for OPEC's failure to bring the market back into equilibrium: Non-OPEC supply to grow by 1.14m b/d in 2018, up from 800k b/d in 2017. OPEC cuts are expected to be extended and reports that both Libya and Nigeria will agree to a production quota puts the fate of global oil prices in the hands of USA producers. S&P global ratings of oil majors could see their credit ratings cut again if they fail to cut costs and reduce their growing debt loads in the next year. On Tuesday, it said the USA would pump 9.9 million barrels a day.
WTI crude oil prices are gearing up for $41.8 on downside, its key support vicinity. Goldman went as far as saying that oil prices could fall below $40 if the market doesn't get a clear catalyst to buy. As a result, gasoline demand might hit a record in 2017 and 2018.
The EIA's World Oil Outlook, however, suggests that the global oil supply and demand are now balanced at roughly 97 mln bpd being produced and consumed at this point.
"We are still facing a situation where there is an abundance of oil across the globe and demand is increasing at a pace that only makes a small dent in inventories", said Mark Watkins, Regional Investment Manager with U.S. Bank Wealth Management in Park City, Utah. However, the rise of electric auto technology and the re-introduction of coal as source of energy by the Trump administration in the United States might affect these projections.
Hurt by these news, oil prices registered an acute drop on July 5 after their longest rally in more than five years. The oil glut, of which the US shale boom in the USA has contributed to, reduced oil prices and the revenues of oil producing economies.