USA crude oil production is expected to hit 10 million bpd next month, behind only Russian Federation and Saudi Arabia.
This came as the U.S. Energy Information Administration (EIA) raised its 2018 world oil demand growth forecast by 100,000 barrels per day (bpd) from its previous estimate.
The oil price has recently witnessed an increasing trend up to the point that it once reached more than 68 dollars per barrel.
There are several reasons why oil markets have tightened.
As of December, Venezuela's crude oil production was roughly 1.8 MMBPD, the lowest level since February 2003, when most of Venezuela's oil production was shut-in during an oil workers' strike, Kallanish Energy learns.
Prices have fallen for three years straight since then because of a meeting between oil-producing nations on Thanksgiving where Saudi Arabia, the biggest oil exporter, said it would not curb output to balance out an global glut. EIA expects consumption growth will average 1.7 million b/d in 2018 and 1.6 million b/d in 2019, driven by the countries outside of the Organization for Economic Cooperation and Development (OECD).
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-While anti-government protests in Iran and the possibility of USA imposing sanctions again on the country has helped the ongoing crude rally to three-year highs, analysts are cautious as further moves are likely to depend on whether US shale production picks up because of the higher prices.
EIA forecasts USA crude oil production to grow by 980,000 barrels per day in 2018, and we expect most of that growth to come from tight rock formations in Texas and North Dakota, he said. The session high for the global benchmark was US$69.37, highest since May 2015.
On the New York Mercantile Exchange, Brent crude, considered the global benchmark, was trading at $68.82 per barrel at the close of markets while U.S. West Texas Intermediate (WTI) crude ended at $62.96 per barrel.
The growth of North American shale production, which caused an estimated 5 percent increase in USA crude output in 2017, has rocked the oil industry in the past few years, spurring OPEC and other traditional producers to cut output to trim global inventories. Reported as rig counts, gains from the United States would likely drive prices lower as it would be a potential indicator of a future production increase.
US oil futures reversed Thursday's gain in Asian trading Friday, ahead of President Donald Trump's decision on extended sanctions waivers for Iran. Some observers have argued that the vast majority of the production increase has been in the form of natural gas liquids or condensates - lighter hydrocarbons that include propane and butane when refined.