Oil Prices Spike Amid Extremely Large API Crude Oil Draw (USO)

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USA crude inventories fell 4.9 million barrels last week, more than the 3.9-million decline forecast, but bigger-than-expected builds in gasoline and fuel stocks offset that drawdown, the Energy Information Administration reported. Demand is expected to climb an additional 340,000 bpd in 2019 to 20.65 million bpd, the agency said. This reflects strong demand by refiners for prompt crude oil which is a bullish sign for the petroleum markets.

U.S. West Texas Intermediate (WTI) crude futures settled at US$63.57 a barrel, up 61 cents, or 1 per cent, their highest settlement since December of 2014.

Crude oil prices were in volatile territory early Thursday, with the price for Brent crude oil swinging between small gains and losses as the global benchmark tests $70 per barrel. Oil prices are up around 5% already in 2018. USA production fell 2,90,000 barrels per day to 9.5 million bpd, the EIA said, foiling expectations of United States output breaking through 10 million bpd.

Worldwide crude demand is 96 million barrels a day and the country imports around 4.2 million barrels daily or 1,568 million barrels per annum, making it the third-largest consumer globally.

In its previous forecast, issued a month ago, the EIA saw production growth of 780,000 b/d in 2018. That would be the highest annual average production in USA history, surpassing the previous record of 9.6 million barrels a day set in 1970.

US shale is expected to continue to counteract OPEC production cuts this year. The EIA feels the $61/b figure will be driven by slow, but increasing consumption levels that will be offset somewhat by higher global production.

Oil prices have surged more than 13 per cent since early December, and there are indications of overheating.

Most of the remaining growth will come from offshore wells in the federal waters of the Gulf of Mexico, with seven new projects expected to come online by the end of 2019, the agency said. Although more crude oil export infrastructure has been recently built, USA exporters must still use smaller, less-economic vessels or more complex shipping arrangements, which often add to costs.

Worldwide, the EIA sees oil consumption rising by about 1.7 mb/d in both 2018 and 2019, led by stronger demand from China and India.

"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.

OPEC and non-OPEC participants agreed on November 30, to extend the production cuts through the end of 2018 in an effort to reduce global oil inventories.

"Coal's forecast generation share falls from 30% in 2017 to slightly lower than 30% in 2018 and 28% in 2019". EIAs January Short-Term Energy Outlook forecasts Brent to average $60/b in 2018 and $61/b in 2019. Non-hydropower renewables provided nearly 10% of electricity generation in 2017, and its 2018 share is expected be similar before increasing to nearly 11% in 2019.

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