U.S. oil inventories keep falling, but products are rising

US Oil Output Will Hit 11 MMBOPD in 2019: EIA

According to trade press reporting and tanker tracking data, importing diluent for blending with its heavy oil is becoming increasingly hard for Venezuela.

Oil prices fell on Friday after hitting a three-year high of more than $70 a barrel the previous day, but they were still on track to post a fourth straight week of gains.

Brent crude futures settled at US$69.20 a barrel, up 38 cents. OPEC in December, however, produced about 50,000 barrels per day more than in November.

Rising prices are putting United States production on track to rival both Saudi Arabia and Russian Federation, with output likely to exceed 10 million barrels a day as soon as next month and top 11 million before the end of 2019, according to Energy Information Administration forecasts. China's crude imports in December fell 9 percent month-on-month to 33.7 million tonnes, or 7.97 million bpd, customs data showed. However, the high compliance rate in the latest data includes a sizeable drop in Venezuela's production level of more than 0.2 MMBPD in 2017.

The increased crude prices are already having an impact at gas stations across the U.S. According to travel analyst group AAA, the $2.49 per gallon average U.S. gas price on New Year's Day of 2018 was the most expensive price for that date since 2014.

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The IEA warned that mostly due to US shale, total supply growth could exceed demand growth. The agency increased its demand estimates for 2018 to 470,000 bpd from 410,000 bpd. EIA expects consumption growth will average 1.7 million b/d in 2018 and 1.6 million b/d in 2019, driven by the countries outside of the Organization for Economic Cooperation and Development (OECD).

Eagle Ford production is expected to be from 1.2 million bpd to 1.3 million bpd this year and next, which EIA said is slightly above the 2017 level.

"Inventories ended 2017 9.3 percent above the five-year average, a stark contrast to the 35.6 percent surplus seen at the end of 2016", Oil Futures Editor Geoffrey Craig said in a statement emailed to UPI.

On the other hand, higher crude prices will increase price of natural gas which in turn will increase input cost for fertiliser and petrochemical companies that use fertilisers as a feedstock and increase the price of city gas distributors and power companies.

If achieved, it would break previous records as higher petroleum prices trigger a drilling revival in shale fields, the Energy Information Administration's first short-term forecast for 2019 reveals.

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