Though breaking through the symbolic $70 price level for the global benchmark is music to the ears of some producers who have cut output, higher oil prices are both a blessing and a curse for Russian Federation and many OPEC members that have sought to curb production to keep oil prices relatively stable without causing them to increase so much that they boost investment in North American shale oil production and alternative energies.
-While anti-government protests in Iran and the possibility of USA imposing sanctions again on the country has helped the ongoing crude rally to three-year highs, analysts are cautious as further moves are likely to depend on whether US shale production picks up because of the higher prices.
Brent for March settlement advanced to $69.90 a barrel on the London-based ICE Futures Europe exchange at 11:28 Eastern time.
USA crude oil production is being forecast to average 10.3 million b/d in 2018, marking the highest annual average production in US history. The February contract for light sweet crude gained $1.23 USA to settle at $62.96 USA a barrel. EIA forecasts the US average regular retail gasoline price will average $2.57/gallon (gal) in 2018 and $2.58/gal in 2019, slightly higher than the $2.42/gal average in 2017.
OPEC and non-OPEC participants agreed on November 30, to extend the production cuts through the end of 2018 in an effort to reduce global oil inventories. Reported as rig counts, gains from the United States would likely drive prices lower as it would be a potential indicator of a future production increase.
The IEA warned that mostly due to US shale, total supply growth could exceed demand growth.
Some 800,000 bpd of the projected 1.2 million USA increase from December 2017 to December 2019 is expected to come from tight rock formations in the Permian region in Texas and New Mexico, the agency said. Demand is expected to climb an additional 340,000 bpd in 2019 to 20.65 million bpd, the agency said.
The agency also sharply raised its outlook for USA oil production for the coming year it now sees production averaging 10.3 million b/d, or almost 1 mb/d more than in 2017.
The EIA is out with the latest edition of its Short-Term Energy Outlook, examining projections for the energy industry for the next two years.
Liquefied natural gas gross exports are forecast to average 3 bcf per day in 2018, up from 1.9 bcf in 2017. GasBuddy also released a forecast for 2018 last week that predicted gas prices will be at their highest levels since 2014.