Demand is also likely to rise in 2018, at least in the short term. Exports of refined products fell by 1.12 million barrels a day last week to 4.47 million.
"With that partially offsetting production cuts by OPEC and Russian Federation, the market will have to get confirmation that global inventories will keep coming down", Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, told Bloomberg. "US oil production surpassed the 2015 highs in October and is set to climb to historic highs this year", he said.
Notably, the number of active oil rigs in the United States rose steadily to 747 at year-end, a dramatic increase from the low of 316 reached in May 2016. By year-end, however, output was close to 9.8 million bpd and is expected to pass 10 million soon. Nigerian output increased by an average of 400,000 bpd and Libyan production rose by 100,000 bpd.
Meanwhile, there are reports that the protests sweeping the nation are being used as a cover for militants operating within Iran, giving them the opportunity to strike at key infrastructure and oil production facilities.
Oil prices will remain at $40-$60 per barrel in 2018 despite the extension of OPEC-led production cuts through the end of the year, Moody's Investors Service has stated in in its 2018 trend report for the global oil and gas industry.
While part of that resurgent growth has undoubtedly been down to lower prices the pick-up in the global economy is also a major factor, with most forecasters believing the world is now enjoying the strongest period of expansion since the financial crisis.
The US has not been the global leader, nor ahead of both Russian Federation and Saudi Arabia, since 1975.
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OPEC meets again on 20 June 2018, and if crude is still at $60 then Graham-Wood thinks a $75 year-end may be a realistic possibility.
Nigeria and Libya have also agreed to the output cut. Still, the risk of geopolitical concerns is not to be overlooked, according to the bank.
While there is a risk they may take profits after recent gains, potentially pressuring the market if funds sell out of positions, there are reasons to suspect they will not be easily dislodged.
Analysts at Accendo Markets added that a 5m barrel inventory drawdown in the U.S. reported overnight by the American Petroleum Institute (API) added to bullish sentiment.
Most forecasters, including the IEA and OPEC, predict the oil market will be in a small surplus during the first half of 2018, followed by a deficit in the second.
The market now appears to be re-stabilizing, with Reuters reporting that oil prices have hit their highest-point in two years this week.
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