Oil markets cling to near three-year highs on tighter US market

The world’s most expensive oil

The US Energy Information Administration (EIA) forecast mostly flat crude oil prices and increasing production in 2018 and 2019 in a latest update yesterday. An oversupplied market contributed to a sharp decline in crude oil prices, which dropped below $30 per barrel two years ago.

Singapore average refinery profit margins have fallen below $6 per barrel this month, their lowest seasonal level in five years.

"EIA estimates that Opec countries cut crude oil production output in 2017, but those cuts were offset by increased production in non-OPEC countries, especially the United States and Canada", John Conti, EIA acting administrator, said in a statement.

Prices have fallen for three years straight since then because of a meeting between oil-producing nations on Thanksgiving where Saudi Arabia, the biggest oil exporter, said it would not curb output to balance out an global glut.

US crude oil production is expected to hit 10 million bpd next month, behind only Russian Federation and Saudi Arabia.

The monthly average for February is expected to surpass 10 million bpd, said Tim Hess, the lead analyst for the report.

The rally has brought out some concerns that the market could overheat, especially as US production is expected to rise to new records.

Production from the Permian is expected to be 3.6 million bpd by the end of 2019, an increase of roughly 900,000 bpd from December 2017, and 32 percent of USA crude oil production in 2019. While this spike in demand is an opportunity for USA producers, it comes at a cost to consumers in the region. That was slightly below the five-year average of just over 420 million barrels, the target for OPEC and others cutting output. Demand is expected to climb an additional 340,000 bpd in 2019 to 20.65 million bpd, the agency said.

USA crude oil production is being forecast to average 10.3 million b/d in 2018, marking the highest annual average production in US history.

Saudi Arabia and a number of Persian Gulf producers reduced crude oil production in support of the agreement.

Overall, dry natural gas production averaged 73.6 billion cubic feet per day in 2017, up 1 percent from 2016. The average sale price of gas in 2017 was $2.42/gal. 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.

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.

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