Economy

Oil prices set for fourth straight week of gains

Oil prices set for fourth straight week of gains

Unlike, OPEC and its allies, the U.S. Energy Information Administration (EIA) forecasts oil prices to average $55/b bl in 2018 as 'c rude oil production from the United States is expected to increase more than in any other country.' However, narrowing U.S. inventories paired with the recent slowdown in field production may keep oil prices afloat especially as the bullish momentum appears to be gathering pace.

The forecast had no impact on the oil market on Tuesday. By the end of the year, however, structural limitations caused Libya's and Nigeria's production to peak.

Iranian Oil Minister Bijan Zangeneh said Tuesday that prices this year were supported in part by OPEC commitments, but also by demand strains from severe winter weather.

Total US petroleum and other liquid fuels consumption is forecast to average 20.3 mb/d this year, up 2.4% from 2017, and rising by another 340,000 b/d, or 1.7%, in 2019. That level would be the highest annual average on record, surpassing the previous record of 9.6 million b/d set in 1970. In December alone, production fell by an estimated 100,000 barrels per day to around 1.7 million. That would be like if Saudi Arabia, or Russian Federation or the United States stopped producing oil completely.

USA production growth is estimated at 1.5 million bpd in 2018 and 1 million bpd in 2019, with Canada and Brazil expected to contribute combined growth in both years of some 400,000 bpd. However, this expected economic growth could be curtailed by any number of events.

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“EIA forecasts USA crude oil production to grow by 980,000 barrels per day in 2018, and we expect most of that growth to come from tight rock formations in Texas and North Dakota, ” he said. This condition was most likely the result of over-production that drove prices down over the last five years.

Fatih Birol, head of the Paris-based International Energy Agency, said on Friday that oil prices at $65 to $70 a barrel risked encouraging more oversupply from US shale drillers. By many estimates US production is set to take off this year - which is concerning for many other producer nations. Although more crude oil export infrastructure has been recently built, US exporters must still use smaller, less-economic vessels or more complex shipping arrangements, which often add to costs.

US West Texas Intermediate (WTI) crude futures were at $63.53 a barrel at 0144 GMT, 4 cents below their last settlement but still close to a December 2014 high of $63.67 per barrel reached the previous day.

The market was bolstered modestly by data showing a sharp decline in USA production last week.

Giovanni Staunovo, a commodity analyst for UBS, told UPI there were a variety of factors apart from Trump's decision that were pulling oil prices into negative territory.


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