Despite the prospect of flat crude oil prices into the future, EIA forecasts total US crude oil production will increase to an average of 10.3 million b/d in 2018, up 1.0 million b/d from 2017.
Oil slipped in London after briefly climbing above $70 a barrel for the first time in three years as a global surplus recedes.Brent futures declined 0.6 percent, having added 1.8 percent this week in a fourth weekly increase.
-While anti-government protests in Iran and the possibility of US 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 USA shale production picks up because of the higher prices.
Data from the U.S. Commodity Futures Trading Commission shows the size of the short position for swap dealers has climbed into record territory, an indication of increased producer hedging.
With global oil prices solid at the moment and expected to rise, the 11 million barrels a day forecast is ominous for the buoyant oil market and OPEC in particular which may be forced to extend is production cap past the end of 2018 and well into 2019. The rally in oil prices, which are up 59 percent since 2017 lows reached in June, has been driven by a number of forces, including increased demand and continued production cuts.
That's even with a 2.4% rise in global demand this year and 1.7% in 2019, according to the EIA. In December alone, production fell by an estimated 100,000 barrels per day to around 1.7 million.
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West Texas Intermediate, the USA benchmark, has been trading over $60 per barrel for several weeks now. These liquids are less valuable than gasoline and diesel to refiners and largely are destined to the export market, where they are sold relatively cheaply.
Nevertheless, higher oil prices will make investment into USA shale oil more attractive. That compares with an average build of 6 million barrels for the same period from 2013-17. "As per the International Energy Agency's latest data U.S. production has been averaging 9.6 million barrels per day", the report said.
In its previous forecast, issued a month ago, the EIA saw production growth of 780,000 b/d in 2018.
Imports into the U.S. Atlantic Coast (USAC) have also been soft recently. Since the past two years, the United States has been increasing production and exports.
Gasoline stocks normally increase toward the end of the year. "OPEC is edging ever closer to its desired target of reducing OECD industrial stocks to the five-year average".
For more information on crude oil, visit the S&P Global Platts website.