Oil, Gas Prices Will Continue to Climb

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U.S. crude oil production is expected to surpass 10 million barrels per day (bpd) next month, en route to an all-time record months ahead of previous forecasts, the U.S. Energy Information Administration said Tuesday. Gasoline consumption, averaging 9.1 million barrels a day over the past four weeks, is up a healthy 2.5 percent from a year ago. While crude supplies fell by 4.9 million barrels, gasoline stocks rose by 4.1 million barrels and distillate storage levels jumped by 4.3 million barrels, according to U.S. Energy Department data.

The American Petroleum Institute (API) reported a staggeringly large draw of 11.19 million barrels of United States crude oil inventories for the week ending January 5. That has changed in the last several years due to the shale revolution, but these projections surpass earlier expectations. USA gasoline stocks rose 4.1 million barrels, EIA data showed, more than expected, while Singapore average refinery profit margins have fallen below $6 per barrel this month, their lowest seasonal level in five years.

US output will be at an all-time high in 2019, surpassing 11 million bpd by the end of that year, a new high for national output, the EIA said in the report.

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 US crude oil production in 2019.

Also impacting prices is an increase in Asian demand for crude oil and petroleum products.

He warned, meanwhile, that oil prices above $60 per barrel could be a spoiler as US shale oil producers would take advantage of the rally by expanding their exploration and production work. As a result, pipeline capacity constraints should not be a major limiting factor in starting new production, he said.

US West Texas Intermediate (WTI) crude futures were at $63.53 a barrel at 0144 GMT, 4 cents below their last settlement but still close to a December 2014 high of $63.67 per barrel reached the previous day.

Analysts said his remarks alleviated market concerns about a wind-down of the OPEC-led deal to reduce production. Though breaking through the symbolic $70 price level for the worldwide benchmark is music to the ears of some producers who have cut output, higher oil prices are both a blessing and a curse for Russian Federation and many OPEC members that have sought to curb production to keep oil prices relatively stable without causing them to increase so much that they boost investment in North American shale oil production and alternative energies.

USA production for 2017 averaged an estimated 9.3 million bpd, and is estimated to have averaged 9.9 million bpd in December, EIA said.

US production growth is estimated at 1.5 million bpd in 2018 and 1 million bpd in 2019, with Canada and Brazil expected to contribute combined growth in both years of some 400,000 bpd. The EIA anticipates OPEC production to increase by 500,000 b/d in 2019 as it slowly returns to pre-agreement levels.

Gulf of Mexico production is expected to average 1.7 million bpd in 2018, relatively unchanged from 2017, and then increase to 1.8 million bpd with the anticipated start of production from the Appomattox project in the Rydberg field and the Mars project in the Kaikias field, along with other projects expected to begin operations this year and next.