U.S. crude futures retreat from 2019 high on soaring production

Kenny Grant
March 17, 2019

"On the supply side, the production losses to start 2019 remain large with core-OPEC producers adopting a "shock and awe" strategy and exceeding their cut commitment", the bank added.

In its Oil Market Report released on March 15, the IEA (International Energy Agency) estimated that the oil market will fall into a deficit of 0.5 MMbpd (million barrels per day) in Q2 2019, which could help United States crude oil prices to easily move above the psychologically important level of $60. Meanwhile, sources told Reuters that OPEC producers and their partners are expected to extend their cuts to oil supply when they meet in June, a decision likely to keep prices elevated. This led to the US taking a number of steps in the 1980s to take away OPEC's monopoly in determining oil prices, and the USA has strengthened global commodity markets with Chicago and NY.

The IEA, on the other hand, foresees that OPEC countries will reduce their production to 380,000 barrels per day by 2024 such that the global oil prices will not decline.

The bank concluded that the world's thirst for oil will result in Brent prices being pushed above $70 per barrel and perhaps even the wrath of US president Donald Trump may not be enough to change their trajectory.

"This highlights the continued shared responsibility of all participating producing countries to avoid a relapse of the imbalance and continue to support oil market stability in 2019".

"OPEC's compliance was a robust 94 percent, compared to 51 percent from non-OPEC", said the IEA, adding that major producer Russian Federation was continuing to adjust its production gradually.

With production in Canada also increasing, and most of its exports moving to U.S. refineries, more USA crude should be available for export.

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The U.S. Energy Information Administration (EIA) said U.S. commercial crude oil inventories fell last week as refineries hiked output.

EIA's data also showed that on the exports side, USA crude oil exports increased while domestic production rose as well. With increasing competition, the global demand for OPEC production will not return to pre-2016 levels during the period in question.

Venezuela's oil production has taken a serious hit in recent years falling from approximately 2.4 million barrels a day (bpd) in 2015 to around 1.2 million bpd, as of the latest figures in February.

Meanwhile, a political and economic crisis worsened by USA sanctions has slashed Venezuelan crude exports. The report states that daily US export capacity during the period in question will pass Russia's and get close to Saudi Arabia's with 9 million barrels.

Speaking about Azerbaijan oil production indicators Azerbaijan exported 5.78 million tons of oil in January-February 2019, which is 58 percent more than in two months of previous year, Trend reports with reference to the State Customs Committee of the country on Friday.

In a Financial Times news article, according to market research firm Rystad Energy's predictions, we will experience a 2019 where very shocking changes that would not have come to mind will take place in the global energy market.

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