Oil Price Rises As OPEC Cuts Supplies

Oil Price Rises As OPEC Cuts Supplies

Even the US Energy Information Administration's report Wednesday that US crude production reached 10.04 million b/d in November, the highest in 47 years, could be masking tightness in some parts of the market, independent analyst Anas al-Hajji said. Production in the Federal Gulf of Mexico reached 1.67 million b/d, up 14% from the October 2017 level as the region recovered from Hurricane Nate.

"The rebalancing of the oil market has likely been achieved, six months sooner than we had expected", Goldman's analysts wrote. Production is increasing much quicker than demand. A decade ago, in November 2008, production from tight formations accounted for only 7% of total USA production.

Goldman Sachs set a six-month target above US$82 a barrel and JP Morgan was more conservative at US$70 a barrel as an average for 2018. Given that Oil is quoted and traded in U.S. Dollars, a rise in the U.S. currency is a direct hit to Oil prices. The administration also has unveiled a comprehensive offshore drilling plan that, if implemented, would dramatically drive up USA production levels.

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Texas led the way, producing 3.89 million barrels each day last November, the EIA said in its report.

The U.S. has only crossed the 10 million-barrel threshold three times. This 10 million number is a big deal, as it puts the United States on par with the production of Oil giant Saudi Arabia and is eclipsed only by that of Russian Federation, who put in an average of 10.98 million barrels per day previous year.

In world markets, oil prices were up in trading yesterday along with OPEC continued commitment to reduce supplies. More U.S. crude oil, meanwhile, continues to pour into the global market, giving traders enough demand indicators to shrug off the build of 6.8 million barrels in crude. Oil and Gas Journal economist Conglin Xu said that will see the USA overtake Saudi Arabia and possibly Russian Federation. "Fundamentally speaking, there's a high chance that the US will boost production and conflicts could also increase among OPEC nations if prices continue to surge".

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The West Texas Intermediate for March delivery increased 1.07 USA dollars to settle at 65.80 dollars a barrel on the New York Mercantile Exchange, while Brent crude for April delivery added 0.60 dollar to close at 69.65 dollars a barrel on the London ICE Futures Exchange.

Worldwide benchmark Brent crude added 76 cents Thursday to $69.65. Yet, the bank said its view was cyclical and sees Brent dropping down to US$60 a barrel by 2020. On Wednesday, the EIA released its weekly production and supplies report for January 26. Dynamics Experience shows that rig counts generally follow changes in benchmark West Texas Intermediate futures prices with a lag of around four months.

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