Oil Reverses Lower As US Crude Production Hits 10 Million Barrels

Brent Crude

Goldman Sachs sees global benchmark Brent crude oil trading at Dollars 82.50 per barrel within the next six months. "Monthly average Brent prices have increased for seven consecutive months", EIA said. U.S. West Texas Intermediate crude futures shed 55 cents to $63.60.

In its latest monthly oil market report, the International Energy Agency (IEA) is predicting US crude production, boosted by "a resurgent shale industry", would climb above 10 million barrels a day this year, surpassing Saudi Arabia and Russian Federation.

The agency forecast US crude oil output will rise by 1.26 million bpd to 10.59 million bpd in 2018.

To oil bears, the drop in crude oil, based on the U.S. production is a valid move.

During the previous session, the price of oil touched a one-month low and wiped out most of the cumulative rise since the beginning of the year. Although it exports more than two million barrels a day, the Middle Eastern country typically imports extra-light condensate to process in a unit known as a splitter.

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The amount of crude processed by refineries increased 784,000 b/d to 16.797 million b/d, raising the utilization rate by 4.4 percentage points to 92.5% of capacity.

In 2017, 56% of China's crude oil imports came from countries within the Organization of the Petroleum Exporting Countries (OPEC), a decline from the peak of 67% in 2012.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017. This could offset the Opec production cuts to a large extent and keep oil prices capped at higher levels.

Brent futures have lost around 8 per cent in value since reaching a four-year high above $71 in late January, and investors in crude are still sitting on one of the largest bullish positions in history.

Crude oil on Wednesday held mostly steady as concerns about volatility in global markets offset an unexpected drop in United States inventories. According to London-based consultancy Energy Aspects, a slump in new production outside the USA shale patch in 2019 could help boost Brent above $100/b next year. Earlier this week, the USA government forecast production rising above 11 million barrels a day this November, which would exceed top world producer Russia's current level. The grade suffered its biggest drop in two months on Wednesday after the publication of USA inventory data.

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