The price of West Texas Intermediate crude in NY was $US62.67 a barrel, on Tuesday, the highest in since December 2014.
This reduction in the size of excess stocks emerged as a catalyst for higher oil prices.
Expectations of another drain on US crude oil inventories supported a soft increase in oil prices early Tuesday, though a reversal may be overdue.
Despite the rising production, oil prices edged higher on Tuesday, with USA crude touching its highest since December 2014, closing at $62.96 a barrel.
For most of 2017, the resurgence of USA crude oil production was capping price gains and offset part of the production cuts that OPEC and its Russia-led non-OPEC partners have been implementing since January a year ago. Although more infrastructure to export crude oil has been recently built, United States exporters must still use smaller, less-economic vessels or complex shipping arrangements, which add to costs.
Brent crude futures, used in the pricing of more than half the world's oil, rose as much as 1.2 percent to the highest since December 4, 2014.
U.S. crude oil production is expected to surpass 10 million barrels per day (bpd) next month, en route to an all-time record months ahead of previous forecasts, the U.S. Energy Information Administration said Tuesday.
Inventories ended 2017 9.3% above the five-year average, a stark contract to the 35.6% surplus seen at the end of 2016.
Crude oil prices are up almost 4 percent in the span of seven trading days in one of the commodity's sharpest rallies in years. In both 2018 and 2019, EIA expects total global production to be slightly greater than global consumption, with US production increasing faster than production in any other country, contributing to modestinventory builds.
Inventories declined in 2017 for the first time in 4-years as refiners are running at near record rates. EIA forecasts the USA average regular retail gasoline price will average $2.57/gallon (gal) in 2018 and $2.58/gal in 2019, slightly higher than the $2.42/gal average in 2017. "Another variable to watch will be USA crude oil production". The EIA expected USA crude oil production to increase more than in any other country.
This week, the API reported another build in gasoline inventories of 4.338 million barrels for the week ending January 5.
Imports into the U.S. Atlantic Coast (USAC) have also been soft recently.
The main question for USA gasoline stocks will be whether last week's storm that brought ice and snow up and down the East Coast dampened demand, as expected with drivers trying to stay off the roads.
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