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U.S. oil hits highest since 2014, worries grow of overheated market

13 January 2018

US crude production fell in the most recent week by almost 300,000 barrels per day to about 9.5 million bpd, which analysts attributed to the deep freeze across most of the country.

United States production also fell by 290,000 barrels a day to 9.5-million barrels a day, the administration said, despite the expectation of output breaking through 10-million barrels a day.

A broad, global market rally, including stocks, has also fed investment into oil futures.

This has contributed to a fall in Singapore refinery profit margins DUB-SIN-REF to below $6 per barrel this month, their lowest seasonal level in five years, leading some refiners to scale down crude runs.

On the data front, the number of rigs operating in US oil fields rose by 10 to 752 this week, the biggest increase since June, oilfield service firm Baker Hughes said in its weekly report on Friday. "Another variable to watch will be USA crude oil production". In both 2018 and 2019, EIA expects total global production to be slightly greater than global consumption, with USA production increasing faster than production in any other country, contributing to modestinventory builds. 2019 USA production is forecast to average 10.8 million bpd, and to top 11 million bpd in November 2019, the agency said.

USA output will continue to rise in 2019, surpassing 11 million bpd by the end of that year, the EIA report said.

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The rally has brought out some concerns that the market could overheat, especially as USA production is expected to rise to new records. Analysts warned the market is not paying enough attention to USA production increases. By many estimates US production is set to take off this year - which is concerning for many other producer nations. OPEC, along with non-members including Russian Federation, have extended through the end of this year a deal to cut supply by 1.8 million bpd.

Most of the remaining growth will come from offshore wells in the federal waters of the Gulf of Mexico, with seven new projects expected to come online by the end of 2019, the agency said.

When Russia and Saudi Arabia and its OPEC allies began limiting output in January 2017, their main goal was not necessarily to increase oil prices above $70 or even $60 per barrel, but to reduce global oil inventories.

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.

Overall, dry natural gas production averaged 73.6 billion cubic feet per day in 2017, up 1 percent from 2016. The EIA is forecasting that the average price of gasoline for all of 2018 will be $2.57 a gallon, up from $2.42 a gallon in 2017. At the same time, US refiners export both diesel fuel and gasoline as well as crude.

U.S. oil hits highest since 2014, worries grow of overheated market