Oil prices high on expectations of USA inventory drains

Oil prices high on expectations of USA inventory drains

Oil prices high on expectations of USA inventory drains

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.

EIA forecasts the West Texas Intermediate (WTI) crude oil spot price will average $55/b in 2018 and $57/b in 2019. The price of Brent crude oil averaged $54/barrel (b) in 2017, an increase of $10/b from 2016.

Oil prices fell yesterday after hitting a three-year high over $70 a barrel the previous day, but remained on track to post a fourth straight week of gains.

Much of the production growth will be concentrated in the Permian Basin, the largest USA oilfield stretching across Texas and New Mexico, said John Staub, the EIA director of the office of petroleum, natural gas and biofuels analysis.

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At 08:53 a.m. EST on Friday, WTI Crude was down 0.44 percent at $63.26, and Brent Crude was down 0.14 percent at $68.89, as investors were awaiting U.S. President Trump's decision on Iran and Baker Hughes rig count data.

Novak said the current oil price was short-term, and he would discuss the situation at a ministerial monitoring committee meeting in Oman, scheduled for January 21.

Oil prices settled higher Friday as Russia's oil minister said that global crude supplies were "not balanced yet". Oil prices are up around 5% already in 2018.

The market was supported by OPEC-led production cuts and expectations that US crude inventories have dropped for an eighth week.

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Oil prices are now at levels at which US production could substantially increase.

Most of the remaining growth will come from offshore wells in the federal waters of the Gulf of Mexico, with seven new projects expected to come online by the end of 2019, the agency said.

In the United States, crude oil production (C-OUT-T-EIA) is expected to hit 10 million bpd next month, leaving only Russian Federation and Saudi Arabia at higher levels.

The national average price this summer should peak in August at $2.63.

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That's bad news for the U.S. coal industry and Donald Trump ambitions to restore coal's fortunes. The EIA expects global inventories to increase by 300,000 b/d in 2019. Non-hydropower renewables provided nearly 10% of electricity generation in 2017, and its 2018 share is expected be similar before increasing to nearly 11% in 2019.

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