Oil markets cling to near 3-year highs on tighter United States market

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To really understand what's helping push oil prices toward $70 a barrel, just follow the money.

“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.

Gasoline inventories rose by 4.1m barrels to near the top of the average range, while analysts expected a smaller 2.6m barrel increase.

U.S. West Texas Intermediate (WTI) crude futures settled at $63.80 a barrel, up 23 cents, the highest since December 2014.

USA output will continue to rise in 2019, surpassing 11 million bpd by the end of that year, the EIA report said.

Oil prices have surged more than 13 per cent since early December, and there are indications of overheating.

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The West Texas Intermediate for February delivery increased 0.50 USA dollar to settle at 64.30 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery added 0.61 dollar to close at 69.87 dollars a barrel on the London ICE Futures Exchange.

"This drop in margins could reduce Asian refiners' demand for incremental crude in the near term and weigh on global (crude) prices", said Sukrit Vijayakar, director of energy consultancy Trifecta.

Also impacting prices is an increase in Asian demand for crude oil and petroleum products.

The crude market's focus has so far been on signs of tightening supplies as the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation lead production cuts aimed at propping up prices.

"Inventories ended 2017 9.3 percent above the five-year average, a stark contrast to the 35.6 percent surplus seen at the end of 2016", Oil Futures Editor Geoffrey Craig said in a statement emailed to UPI. For 2019, EIA expects crude oil production will average 10.85 mb/d, as it rises towards the end of the year, topping 11 million barrels a day in November of next year. However, the high compliance rate in the latest data includes a sizeable drop in Venezuela's production level of more than 0.2 MMBPD in 2017.

Ole Hansen, head of commodity strategy at Saxo Bank, said this week that "bullish news tends to get more attention than potentially bearish signals". As U.S. shale producers blaze ahead at turbo-speed, the EIA's number crunchers have taken note. In both 2018 and 2019, EIA expects total global production to be slightly greater than global consumption, with US production increasing faster than production in any other country, contributing to modestinventory builds. But Opec secretary general Mohammed Barkindo said there was "no panic" about rising prices.

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