The Energy Information Administration reported a crude oil inventory build of 3.7 million barrels for the week to February 15, versus an increase of 3.6 million barrels in the previous week, pushing prices lower.
Brent crude and West Texas Intermediate have been trending higher today as news reports strengthen hopes the OPEC cuts will do their job and boost prices. The latest here was a visit by a special Saudi Arabian envoy to Nigeria, which had been straying from the production cut path, instead increasing its crude oil production. After the visit, however, Nigeria's president pledged a production cut.
New production data from the EIA failed to reverse the optimism: the authority forecast that shale oil production will hit a record 8.4 million bpd largely on the back of strong production growth in the Permian. Production in the Permian is set to rise above 4 million bpd for the first time in history next month, the Energy Information Administration said in the latest release of its Drilling Productivity Report.
Meanwhile, gasoline inventories in the world's largest consumer of oil and oil products fell by 1.5 million barrels last week, versus a 400,000-barrel rise a week earlier. In distillate fuels, the EIA reported a 1.5-million-barrel decline as well, compared with a 1.2-million-barrel inventory rise a week earlier.
Refineries last week processed 15.7 million barrels of crude daily, compared with 15.8 million bpd a week earlier, producing 9.5 million bpd of gasoline and 4.8 million bpd of distillate fuels. A week before that, refineries in the U.S. churned out 9.6 million bpd of gasoline and 4.8 million bpd of distillate fuel.
At the time of writing Brent crude was trading at US$66.94 a barrel and West Texas Intermediate was changing hands for US$56.88 a barrel, slightly down from opening today and EIA's figures are bound to cause something more than a lukewarm reaction in markets.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
The world has got used to hype by the EIA about US shale oil production despite a spate of recent authoritative reports talking of a slowdown in shale oil production in the Permian which is considered the best shale play in the United States and also a newly tapped play unlike other plays like the Eagle Ford and the Bakken.
The bulk of US shale oil production has recently been coming from the Permian particularly after the steep decline of both the Bakken and the Eagle Ford shale plays in 2016. However, the Permian production is projected to plateau by 2020 with growth slowing down from 860,000 b/d in 2018 to a mere 230,000 b/d barrels by 2020. Such a development definitely argues against any pronounced rise in US oil production in 2019 and beyond. An eventual plateau in Permian oil supply will have profound implications for long term oil prices.
Yet, the EIA is projecting that US oil production will average 12.4 million barrels a day (mbd) in 2019 compared with 10.9 mbd in 2018 and averaging 13.2 mbd by 2020.
Brent crude buoyed by robust fundamental of the global economy is heading beyond $80 a barrel this year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London