This month’s Oil Market Report (OMR) reiterates last month’s message – “in 2018, fast-rising production in non-OPEC countries, led by the US, is likely to grow by more than demand.”
Crude oil prices declined slightly on Tuesday on the release of the IEA report. As of 11:05 a.m. EST, WTI 58.40 USD -0.98 (-1.65%) according to Markets Insider.
Global oil demand grew at a rate of 1.6 million bpd in 2017, however, the rapid rise in production output, particularly in the U.S., could end up pushing global oil inventories which are already very close to their five-year average. The U.S. Energy Information Administration is saying U.S. crude oil output could reach 11 million bpd by the end of this year.
“Today, having cut costs dramatically, U.S. producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth,” the IEA said.
“In just three months to November, (U.S.) crude output increased by a colossal 846,000 bpd and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader.”
The Organization of the Petroleum Exporting Countries (OPEC) are continuing to maintain a joint restriction on crude supply for a second year in 2018, hoping to drain inventories and support oil prices.
Oil inventories among the world’s richest nations fell by 55.6 million barrels in December to 2.851 billion barrels, their steepest one-month drop since February 2011, the IEA said.
“With the surplus having shrunk so dramatically, the success of the output agreement might be close to hand. This, however, is not necessarily the case: oil price rises have come to a halt and gone into reverse, and, according to our supply/demand balance, so might the decline in oil stocks, at least in the early part of this year.”
The IEA says high oil prices, like the $70 a barrel seen in January could be sustained, even with U.S. production increases, but only if global growth remains strong, or if unplanned supply outages persist. “If so, most producers will be happy, but if not, history might be repeating itself,” the IEA said.
