Oil slides as USA output soars and North Sea crude flows restart

Crude oil inventories were up 1.9 million barrels in the February 2 week to 420.3 million, the second weekly increase in a row after 11 weeks of consecutive drawdowns, said the Energy Information Administration (EIA) on Wednesday.

Prices felt the blow of these revised projections and will likely continue to feel it for a few more days. The EIA forecasts that United States shale oil production will grow by 111,000 barrels a day to 6.55 million bpd in February, a new record. In January, the department expected production of 10.3 million barrels. In June, the price bottomed at $42 a barrel and then started a rally that saw it reach a three-year high of $66 last month.

For next year, oil demand is expected to rise by 350,000 bpd versus 340,000 bpd previously.

It is worth noting that preliminary figures from the US Energy Information Administration show that US production hit 10.25 million barrels a day last week.

Output for U.S. oil is poised to climb above 10 million barrels a day, which would top a record set in 1970 and cement the status of the United States as the No. 2 producer in the world.

But in one of the steepest rises of any oil producer in modern history, US output has surged by more than 20 percent since mid-2016, undermining OPEC's and Russia's efforts to tighten the market and prop up prices by withholding production.

Oil has been caught in the middle of two contradicting influences, the 1.8 million barrels per day (bpd) cut in supply by the Organization of the Petroleum Exporting Countries and Russian Federation, and the increase in US crude output surpassing 10 million bpd.

"The U.S. now exports up to 1.7 million barrels per day of crude, and this year will have the capacity to export 3.8 billion cubic feet per day of natural gas", the Daily Mail informed.

Chinese consumption of oil meanwhile is rising, as reflected by the surge to a record 9.57 million bpd in imports in January, according to official customs data.

Barrel is the unit of measurement of oil volume.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.605, up 1.4 cents from $2.591 a week ago and more than 11 cents per gallon higher than the month-ago price.

After shedding a massive 666 points on Friday, the Dow Jones Industrial Average fell more than 1,175 points, or 4.6 per cent percent, to 24,345.75 at the close of trading on Monday. The agency now expects USA output to average almost 10.6 million barrels a day this year and 11.2 million barrels a day in 2019.

The costs of labor and contracted services have recently risen sharply in the most active oilfields; drillable land prices have soared; and some shale financiers are calling on producers to focus on improving short-term returns rather than expanding drilling.

  • Rogelio Becker