Crude Oil Prices to Remain Bid as Overbought Conditions Persist

US oil output to top record 11 million barrels per day by end of 2019: EIA

USA output will be at an all-time high in 2019, surpassing 11 million bpd by the end of that year, a new high for national output, the EIA said in the report.

Brent also marked a December-2014 high the previous day, at $70.05 a barrel. Earlier prices rose to $63.57, the highest since December 9, 2014.

There are several reasons why oil markets have tightened.

OPEC need not respond to a rise in oil prices by rushing to change a global supply-cutting pact, United Arab Emirates Energy Minister Suhail al-Mazroui said on Friday. The Saudi state oil company is expected to debut this year.

On the opposite side of the market, demand continues to be robust, driven by worldwide economic growth.

Crude Oil Prices to Remain Bid as Overbought Conditions Persist
Crude Oil Prices to Remain Bid as Overbought Conditions Persist

Oil prices hit multiyear highs on Thursday despite warnings that a 13% rally since early December was close to running its course. The EIA expects global inventories to increase by 300,000 b/d in 2019. Two points of particular uncertainty are the USA trade enforcement plans against China that Washington is expected to unveil later this month and the direction NAFTA negotiations will take.

Near-term outlook for USOIL remains constructive as crude prices clear the May 2015-high ($62.56), while the Relative Strength Index (RSI) extends the bullish formation from the previous month and pushes deeper into overbought territory.

The American Petroleum Institute said late on Tuesday that USA crude inventories fell by 11.2 million barrels in the week to January 5, to 416.6 million barrels.

The West Texas Intermediate for February delivery increased 0.50 US dollar to settle at 64.30 dollars a barrel on the New York Mercantile Exchange, while Brent crude for March delivery added 0.61 dollar to close at 69.87 dollars a barrel on the London ICE Futures Exchange. As U.S. shale producers blaze ahead at turbo-speed, the EIA's number crunchers have taken note.

West Texas Intermediate is expected to average $4 below Brent this year and next, EIA said, down from the $6 price differential in the fourth quarter of last year as current constraints on transportation capacity between Cushing, Oklahoma, and the Gulf Coast are expected to lessen. Customers buying gasoline at grocery stores and other independent retailers may pay more than those shopping at name-brand outlets after the biggest gasoline pipeline in the USA sprung a leak in Alabama on September 9. Some observers have argued that the vast majority of the production increase has been in the form of natural gas liquids or condensates - lighter hydrocarbons that include propane and butane when refined. Oil prices are up around 5% already in 2018.

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