U.S. crude production from major shale formations was expected to rise in April to a record 6.95 million bpd, the U.S. Energy Information Administration (EIA) said on Monday. In February, the IEA said that US shale production was growing so quickly that it could lead to another period of lower prices, spoiling OPEC's effort at re-balancing the market just as that elusive goal appeared "close to hand". Today's announcement marks the fourth consecutive month that OPEC has had to raise its expectations for supply growth from the US and other producers.
"There's no stopping us and OPEC's frustration levels are going to grow", said Philip Streible, senior market strategist at RJO Futures in Chicago, referring to efforts by major producers to curb output since a year ago. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.1% at $60.99 a barrel.
The OPEC report raised the non-OPEC supply growth forecast by 260,000 barrels a day in the latest edition, and that from the U.S.by about 12 percent to 1.46 million a day. Increased U.S. crude oil exports were supported by increasing U.S. crude oil production and expanded infrastructure.
"We are now only two to four weeks away from when weekly oil inventory data will start to draw again which should be supportive for oil prices", SEB commodities strategist Bjarne Schieldrop said.
Opec and several other non-Opec producers led by Russian Federation began cutting supply in January, 2017 to erase a global glut of crude that had built up since 2014. Production stood 350,000 bpd higher than in February a year ago when militant attacks and protests disrupted flows, it said. Dr. Fatih Birol, the IEA's executive director, said, "The United States is set to put its stamp on global oil markets for the next five years", but he also noted that a weak global investment climate raises concerns of supply shortages after 2020. Oil inventories happened to climb in January for the first time since July 2017, but only increased by 18 million barrels, or about half of the usual rate for that time of year.
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Inventories rose by 13.7 million barrels in January to 2.865 billion barrels, although this was only 50 million above the five-year average, the closest yet OPEC has come to the original target.
But since Opec expects demand this year to grow by only 1.62-million barrels a day, that would leave the market slightly oversupplied and may require more or longer supply restraint.
With OPEC's efforts already in place and the beginnings of a pullback in June expected by the market, attention has been focused on the current swing factor - American crude production.
OPEC for the first time expects new oil supplies from the United States and other producers to exceed growth in demand this year.
"The distillate number was very supportive, much bigger than anticipated and I think it reflects the cold weather and it also reflects that producers are having a hard time keeping up with the distillate demand globally".