Crude oil prices went down on Friday after the US reported that crude oil production in the country has reached a record 12 million barrels per day. This undermines the OPEC’s efforts to curb supply and tighten global markets.
The futures on US crude oil WTI with delivery in April depreciated by 0.05% to 56.93 USD per barrel, while those of Brent variety decreased by 0.09% to 67.01 USD per barrel.
Crude oil production in the US last week reached a 12 million barrel per day for the first time in the country’s history, according to data from the Energy Information Administration. This means that crude oil production in the US has grown by nearly 2.5 million barrels per day since the beginning of 2018 and by the huge 5 million barrels per day since 2013. The United States is the only country that has reached a similar level of oil production.
Analysts say production in the US will grow even more, and oil companies will increase exports to cope with surpluses.
Crude oil production in the United States will reach 13 million barrels per day by the end of the year, with an average of 12.5 million barrels per day this year.
Crude oil price decreased on Friday, interrupting the winning series this week. Earlier, the raw material prices reached their highest levels since early 2019 against supply cuts by the Organization of Petroleum Exporting Countries.
The OPEC, along with other non-cartel parties, agreed at the end of last year to cut production by 1.2 million barrels per day to prevent market saturation. Another factor influencing the market is the US sanctions against exporters Iran and Venezuela. Goldman Sachs said in a note that it expects OPEC output to average 31.1 million barrels per day in 2019, down from 31.9 million barrels per day.
US commercial crude oil inventories
With the increase in production, the oil reserves also grow. The US commercial crude oil inventories rose by 3.7 million barrels to 454.5 million barrels in the week ended February 15, the EIA said.
Goldman Sachs could be seeing some weeks with 4.6 million barrels per day of gross crude exports by end-year, adding to this week’s new record” of 3.6 million barrels per day. With U.S. supply surging, the bank said it expected non-OPEC supply to grow by 1.9 million barrels per day this year, more than offsetting the OPEC cuts.
That means much will depend on demand, which Goldman said it expected to grow by 1.4 million barrels per day this year.
Given the supply and demand picture, Goldman said that expect 60-65 USD per barrel Brent prices, on average, in 2019 and 2020.
Nigeria could soon start cutting oil production
Nigeria could start reducing its crude oil production in line with the OPEC-wide output cut agreed last December, revealed the President Muhammadu Buhari.
The country was not this time exempted from the cuts: OPEC assigned it a production cut quota of 2.5% of the 1.7 million barrels per day the West African country was producing when the cut agreement was struck. This amounts to about 40,000 barrels per day.
However, instead of reducing its production, Nigeria boosted it with the start of production at the giant Egina offshore field, which is operated by French Total. The French oil giant started production at Egina on December 29. Total noted that the plateau production at the ultra-deepwater field would be 200,000 barrels of oil per day, which would account for some 10% of Nigeria’s oil production at that future point.
Following a wave of militant violence in 2016 and early 2017 that crippled the country’s oil industry, Nigeria’s oil production started to recover in the latter half of 2017, when attacks on oil infrastructure subsided. According to the Nigerian National Petroleum Corporation (NNPC), the country’s oil production increased by 9% in 2018 compared to 2017.