Published: Tue, June 06, 2017
Business | By Pat Ferguson

US Oil Production Could Reach Historic Levels This Year

US Oil Production Could Reach Historic Levels This Year

Opec began production cuts on Jan 1 in a bid to reduce swollen global inventories and bolster the price of oil, which is still stuck at half its 2014 level.

Oil rebounded from the lowest close in more than two weeks after industry data showed USA crude stockpiles extended declines, easing an inventory overhang. Sechin, a close ally of President Vladimir Putin, expects shale oil output to increase by about 1.5 million barrels a day in 2018, close to the entire cut targeted by OPEC and its allies. "As long as US crude stocks draw more because of high exports than low imports from OPEC, it will be hard to have a strong price recovery".

The price of Brent crude increased by 14 cents or about 0.2% to settle at $52.29 a barrel.

The surge in production from the exempt nations threatens to blunt the impact of the accord.

U.S. West Texas Intermediate futures were at $48.31 a barrel, up 65 cents, or 1.4 percent. Rystad Energy believes this implies another upward revision of the EIA's official oil production outlook for the USA, which is now at 9.74 million barrels for December 2017.

President Donald Trump has vowed to provide extra support for USA oil production and is widely expected to pull the United States out of a landmark global climate accord.

The number of rigs operating in US fields has jumped by 11 to a total 733 last week, compared with 325 at this time past year.

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There's been modest crude output growth in the Gulf of Mexico, but that production mostly offsets declines seen in conventional oil fields, according to Rystad.

Faced with lingering glut woes, the oil cartel also discussed last week reducing output by a further 1% to 1.5%, and could revisit the proposal should inventories remain high, according to sources.

"There are signs that the 1.8-million-barrel cut is not really what the market is feeling because of rising production in the US, Libya, Nigeria and even the North Sea", said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.

That has the market really concerned and each weekly rise in the number of active rigs in use in the United States adds to the concern and pressures on prices.

Shipping data in Thomson Reuters Eikon shows that Opec tanker supplies to customers around the world were at 24.3 million bpd in May, down from 24.8 million bpd in April and compared with an average of 25.1 million bpd in the first five months of the year.

Crude futures kicked off the week with slight gains, though downward pressure remains as many investors remain unconvinced that production cuts by Middle Eastern and Russian Federation producers are sufficient to offset accelerating output in the USA and Africa.

USA producers aren't part of the output agreement.

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