The United States is about to overtake Russia as the world’s top oil producer in 2019, the International Energy Agency (IEA) said, adding this could even happen earlier, before the end of the current year.
Last week, the Energy Information Administration (EIA) reported average daily production of 10.28 million barrels, up by 10,000 bpd from a week earlier, and by 1.25 million bpd from a year earlier, signaling that producers have no immediate plans to stop ramping up output. That comes despite calls from investors to start returning cash to shareholders instead of focusing on production growth exclusively.
The U.S. production trends are also worrying OPEC more than ever because output is growing strongly just as the results of the cartel’s production cuts become evident. The global oil inventory overhang is much smaller than it was two years ago and yet U.S. production is fueling fears that inventories will start growing again despite the cuts.
Prices are responding with excessive volatility, jumping on a remark from an OPEC official here, falling on an estimated U.S. inventory build from the API. Some analysts are forecasting an average price for West Texas Intermediate of above $60 a barrel while others are seeing a range of $50-75. The latter might turn out to be right if the fast production growth continues and more doubts about the strength of global demand are given cause to persist.
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