US Oil Production To Break New Records

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Data from the US Energy Information Administration (EIA) on Wednesday showed that crude inventories fell by nearly 5-million barrels to 419.5-million barrels in the week to January 5. Platts last week expected a 5.7 barrel million draw, though federal data showed a decrease of 7.4 million barrels.

Oman Minister of Oil & Gas Mohammed Al Rumhy sees oil prices holding around $65-70/bbl for the next few weeks as the region reduces output by 45K b/d, while Russian Energy Minister Alexander Novak warns that ' the market hasn't rebalanced in full ' as Lukoil CEO Vagit Alekperov favors crude stabilizing around $70/bbl.

Oil prices have surged more than 13 per cent since early December, and there are indications of overheating. However, the high compliance rate in the latest data includes a sizeable drop in Venezuela's production level of more than 0.2 MMBPD in 2017.

USA crude production is forecast to average 10.3 million barrels a day in 2018, a record level.

The rally has brought out some concerns that the market could overheat, especially as USA production is expected to rise to new records.

Expectations of another drain on USA crude oil inventories supported a soft increase in oil prices early Tuesday, though a reversal may be overdue.

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Because US production increases will need to compete for market share in Asia, the difference between Brent and WTI prices is supported by cost differences to get there.

Some 800,000 bpd of the projected 1.2 million US increase from December 2017 to December 2019 is expected to come from tight rock formations in the Permian region in Texas and New Mexico, the agency said.

Only Russia C-RU-OUT and Saudi Arabia PRODN-SA have produced more crude, hitting peak output of over 11 million bpd and about 10.7 million bpd respectively in recent years.

The agency also sharply raised its outlook for USA oil production for the coming year it now sees production averaging 10.3 million b/d, or almost 1 mb/d more than in 2017.

In the Bakken production is expected to average 1.2 million bpd this year and 1.3 million bpd in 2019, up from 1.1 million bpd in 2017. The agency expects production to rise by 6.9 bcf per day, 9.3 percent, in 2018, and by 2.6 bcf, 3.2 percent, in 2019. 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.

The U.S. exports natural gas by pipeline to Mexico and imports by pipeline from Canada, with imports averaging 8.2 bcf per day in 2017. Export price index is expected to be 0.3 percent, down from 0.5 percent a month ago.

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