US Crude Production to Beat EIA's Outlook by 23 Years

REUTERS  Hamad I Mohammed  File

REUTERS Hamad I Mohammed File

The surge comes even heavy Western Canadian Select's discount to the USA benchmark reaches a level that makes rail transport inefficient.

Suspense over U.S. -China trade talks and broader gloom over world economic growth put a check on prices, however. Earlier in the week, the EIA reported USA crude oil supplies rose nearly 8M barrels during the week ended on January 18.

Brent has shed about 2.4 per cent since the start of trade on Monday and is on track to post its first week of losses in four weeks.

Also, oil production and exports from Venezuela could be hampered amidst a coup threat on the government.

The driver of Friday's trading activity was said to be the US signalling that it may impose sanctions on Venezuelan exports after recognizing opposition leader Juan Guaido as interim president this week, prompting president Nicholas Maduro to cut ties with Washington.

Brent crude oil futures were at $61.51 a barrel, up 42 cents.

RBC Europe predicted that sanctions could almost double projected output shortfalls from the troubled exporter.

RBC Europe pointed out that "Venezuelan production will decline by an additional 300,000-500,000 barrels per day [bpd] this year, but such punitive measures could expand that outage by several hundred thousand barrels".

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"Venezuela production has been rapidly collapsing, so numerous customers of Venezuela have already been adapting to that decline in supply, including in the US", said Francisco Monaldi, fellow in Latin American energy policy at Rice University's Baker Institute.

Oil market sentiment was also weakened by an increase in USA crude inventories after refineries cut output, data from industry group the American Petroleum Institute showed on Wednesday.

Separately, the EIA's annual energy outlook report released Thursday said US crude oil production is expected to continue to set annual records through the mid-2020s and will remain greater than 14.0 million barrels per day through 2040.

The bank said it expected Brent and WTI prices to average $70 and $59 per barrel respectively in 2019.

US total oil products imports last week averaged 2.4 million barrels per day, up by 310,000 barrels per day from the previous week, while USA total oil products exports last week averaged 4.7 million barrels per day, down by 153,000 barrels per day from the previous week.

A trade dispute between the United States and China and tightening financial conditions around the world have hurt manufacturing activity in most economies and dragged China's growth last year to the weakest in almost 30 years.

Key to the global economic outlook will be whether the United States and China can resolve their trade disputes.

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