News Worms
News Worms

Oil toys with $62 amid Iranian friction, United States drilling pullback

Oil toys with $62 amid Iranian friction, United States drilling pullback

The Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russian Federation are extending the supply cuts through 2018, the second full year of restriction, to reduce the excess in the oil inventories.

OPEC is cutting output by even more than it promised and the restraint is reducing oil stocks globally, a trend most visible in the United States, the world's largest and most transparent oil market. U.S. West Texas Intermediate crude (WTI) gained 36 cents to $62.09 and reached its highest since May 2015 as well at $62.56.

Supply reports this week from industry group the American Petroleum Institute and the US government's Energy Information Administration are expected to show USA crude stocks fell 3.9 million barrels, an eighth week of decline. "We expect to see growth near 2 million barrels per day in 2018 and 1.3 million barrels per day in 2019".

The industry-funded American Petroleum Institute is scheduled to release its stockpiles data on Tuesday.

A third OPEC source said market fundamentals did not justify the price rally.

Crude oil futures continued to surge Tuesday on expectations the global oil market will soon re-balance. Output curbs by the Opec and allied suppliers have buoyed prices, with producers promising to continue the curbs for all of 2018.

There is no sign yet that OPEC is prepared to relax its supply restraint. Only top producers Russian Federation and Saudi Arabia produce more.

US oil and gas production will continue to increase in 2019 as well, to the chagrin of OPEC and Russia-major exporters looking to curb production and reduce competition from American shippers.

The report also noted that the North Sea Brent barrel stands at $64 per barrel, which is the highest it has been since November 2014, the start of the oil price crisis.

In its Short-Term Energy Outlook, released Tuesday, the agency said it expects USA production to break above 11 million barrels per day in November 2019.

"If WTI were to go back below the 2017 high of $60.48, which was hit late in the year, and the 2018's opening price of $60.09, then the technical outlook would turn bearish on oil".

Despite this, USA production is expected soon to rise above 10 million barrels per day, largely thanks to soaring output from shale drillers.


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