OPEC January oil output rises despite Venezuelan decline

OPEC January oil output rises despite Venezuelan decline

Troy Powers
February 5, 2018

Mr Atkinson said that the USA will add about 1 million barrels a day of new supply this year, an estimate "not far" from the outlook by OPEC, which tends to underestimate non-OPEC supply growth outside the US. Mind you, the last time the USA was producing 10 million barrels was back in 1970! The meeting ended with signing an agreement to reduce oil production by a total of 558,000 barrels per day starting from January 2017.

"I think the question, a little bit in the longer term is-is this the last big rise in US production?" he questioned in an interview with Reuters.

USA production doesn't look to slow any time soon.

A new floating production storage and offloading vessel (FPSO) arrived in Nigeria this week, adding 200,000 barrels per day to offshore output capacity.

With investors now pondering which of oil's current key driving forces will prove to be the dominant one - rising USA crude output, or OPEC's adherence to its supply cuts - the relationship with equities and even the dollar is likely to erode.

The move was only a few weeks after the International Energy Agency (IEA) said the United States was set to achieve a "explosive" growth in oil extraction that could overtake Saudi Arabia and Russian Federation this year.

Domestic production grew by 41,000 barrels per day to 9.919 million barrels per day. The county reported production of just less than 10 million barrels a day in December.

Net imports to the United States are still now about 2.5 million barrels a day, down from a record high in 2006 of 13.4 million barrels a day.

Hot toast warm-up for William and Kate at Stockholm bandy session
Duchess Kate tries her hand at " bandy hockey " during day one of a four-day visit to Sweden and Norway on January 30, 2018 in Stockholm.

When I look at the supply side, I can't help but be bearish on oil prices this year.

U.S. West Texas Intermediate (WTI) crude was up 33 cents, or 0.5 percent, at $66.13 a barrel. The price is up almost 50 percent from just more than $44 a barrel in June 2017.

Brent for April settlement jumped 72 cents to US$69.61 a barrel on the London-based ICE Futures Europe exchange. The investment bank said Brent likely will average $75 a barrel over the next three months, up from an earlier forecast of $62.

The strength in the market was welcomed by key players, especially the global oil companies who are reporting this month. "The decline in excess inventories was fast-forwarded in late 2017 by stellar demand growth, high OPEC compliance, heavy maintenance as well as collapsing Venezuela production".

Other analysts are not convinced that the markets justify such a high price. Gas prices are at their highest in months and expected to rise further.

The bank also said rising US shale supply actually will be needed to keep the market steady in the near-term, since any ramp-up in OPEC output will lag the rebalancing. Non-tight oil production has been mostly constant over the previous decade.

The volumes shown here for each play are geologic formation subsets of the regional values presented in EIA's Drilling Productivity Report.