Energy Preview: Crude Oil Futures Outlook Seen Flat For This Year

US oil production’s output will average 10.3 million barrels per day this year

US oil production’s output will average 10.3 million barrels per day this year

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.

"In both 2018 and 2019, EIA expects total global crude oil production to be slightly greater than global consumption, with USA crude oil production increasing more than any other country", its latest report read.

Inventories at the Cushing, Oklahoma, site decreased by 2.516 million barrels this week. Average WTI crude oil prices are forecast to stay between $4/b and $5/b lower than Brent prices in both 2018 and 2019, falling from the $6/b average price difference seen in the fourth quarter of 2017.

This reduction in the size of excess stocks emerged as a catalyst for higher oil prices.

The oil market has been buoyant for weeks, with USA crude futures at highs not seen since late 2014, and Brent crude less than US$1 per barrel away from a similar milestone.

The ability to hold above $60/b will likely be tested as refinery demand ebbs.

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"The lower draw in crude oil stocks, combined with the strong builds in product stocks is bearish news for prices".

Output stayed below that mark the next two weeks, perhaps on account of weather-related problems which could have played a role last week as well.

Oil producers may be enjoying oil prices at $65 to $70, but these price levels are likely to encourage even more oversupply from us shale, Fatih Birol, the Executive Director of the International Energy Agency (IEA), said at an industry event on Friday. While this spike in demand is an opportunity for US producers, it comes at a cost to consumers in the region.

Giovanni Staunovo, a commodity analyst for UBS in Switzerland, said crude oil inventories in the United States, as well as in Asia, are shrinking, which has supported a steady curve upward for crude oil prices since June. If confirmed, that would still be far higher than a year ago when utilization averaged 93.6%.

The West Texas Intermediate (WTI) was trading up 2.33 percent at 63.17 US dollars Tuesday afternoon. Distillates production averaged 5.592 million b/d the week ending December 29, an all-time high for the second period in a row. "Another variable to watch will be USA crude oil production".

On top of usual sources of demand, many industrial and commercial customers in the region were asked by their local utilities to switch from natural gas to heating fuel. Apart from greater domestic production, cargoes were even heard to be headed to the USA from overseas.

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