Already there are analysts warning that prices have nowhere to go but down after net speculative long bets on crude oil, gasoline, and heating oil broke records in the week to December 26, at a staggering 1.183 billion barrels. Besides the peak in May 2015, oil is trading at its highest level since December 2014. USA oil production C-OUT-T-EIA , driven largely by onshore tight shale oil fields, has risen by nearly 16 percent since mid-2016, to 9.75 million bpd at the end of a year ago.
OPEC, the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) all have slightly different figures for OECD commercial crude and products stocks, but they show a similar trend.
As well as this 800,000 bpd average increase in 2018, compared to 2017, the EIA expects global liquid fuels demand to rise by more than 1.6 million bpd this year, up from 1.4-million-bpd growth in 2017.
Six days of unrest in OPEC's third-largest producer, Iran, have generated a geopolitical risk premium to oil prices, although the country's production and exports have not been affected by the protests.
Nevertheless, despite the Opec-led output cuts, the goal of rebalancing supply and demand in the oil market remained elusive. "If we don't see that pattern continue then, we could see a significant correction", McGillian noted. It was the first time since January 2014 that the two crude oil benchmarks opened the year above $60 per barrel.
It noted that higher prices within or above that range would see supply grow as countries lessen their compliance with production quotas and United States shale production continues to increase.
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Analysts at JBC Energy said the price reaction to the Iranian unrest was overdone, while Swiss bank Julius Baer said prices projected "an overly rosy picture" that left the market at risk of profit-taking.
Gasoline stocks in the USA are expected to grow by 2 million barrels a week, distillates - by 1.3 million barrels.
Oil prices fell Friday as some investors cashed in on the week's strong gains and others mulled ambiguous US inventory data.
A massive supply glut caused crude to crash from around United States dollars 100 a barrel to a low of USD 26.
Brent crude futures for March delivery fell 41 cents to $67.66 a barrel, a 0.6 percent loss.
History suggests that OPEC will gamble on tightening the market too much, with prices overshooting on the upside, rather than risk not tightening it enough and prices fall back.