USA to overtake Saudi crude oil production in 2018

Ivan Schwartz
January 23, 2018

The oil producers will officially review their agreement in June and may start to cut quotas in the second half of the year.

USA gasoline and diesel are both the most expensive they have been at this time of year since 2014 and, in contrast to the normal seasonal pattern, pump prices are already rising.

Inventory levels, not just in the US but around the globe, are going to continue to shrink, very quickly. However, the bulls that are riding heavily on this recovery have strong reasons to stick to their stance. "We see that the market surplus is decreasing, but the market is not completely balanced yet and, of course, we need to continue monitoring the situation, " said the minister.

Crude edged lower amid predictions of a steep hike in US crude output this year.

In its report, Opec raised its estimate for global oil demand growth for a year ago, and said oil output would also continue to expand. Even at these forward levels, the price is above the cost of production for a lot of shale producers.

The country produced 4.397 million barrels per day of crude oil in November, the report read.

"This doesn't necessarily mean sticking barrel by barrel to the same limits or cuts, or production targets country by country that we signed up to in 2016, but assuring stakeholders, investors, consumers and the global community that this is something that is here to stay". However, due to continued growth in the U.S. oil output, the predicted recovery in oil prices stalled in the later months of the year.

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IEA analysts believe that steady OPEC production must be treated with caution. Brent reached its highest since December 2014 on Monday of $70.37.

On Thursday, OPEC reported a 42,000-barrel-a-day rise in December oil production from its members, but also modestly lifted its 2017 global demand estimate to 96.99 million barrels a day and forecast 2018 demand at 98.51 million barrels a day. Consequently, the United States oil output has grown sharply over the last few months.

The IEA expects the U.S.to be capable of producing 30 million barrels of oil and gas a day by 2025, a 25% increase from the current levels.

The energy watchdog forecast US supply growth will push its output past 10 million barrels per day (bpd), overtaking Saudi Arabia and rivaling Russian Federation. However, such are the geopolitical uncertainties and the ever-dynamic prospects for USA shale that we should expect a volatile year.

Increases in U.S. oil output are likely to form 80 percent of production worldwide by 2025, which will be equivalent to a boost in demand. A record-high number of long positions on Brent and WTI also helped fuel a concern about the immediate future of benchmark prices.

Mr Atkinson revealed the IEA is expecting a "wave of new production" in the coming months. However, we believe that the OPEC as well as Non-OPEC members have already factored in the impact of the surge in U.S. shale output as a result of these output cuts while deciding their production quotas.

As of Friday (January 19) at 1:35 p.m. EST, oil prices were down, sitting at $63.35 per barrel.

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